The financial balance of the general government (i.e. the central government, the social security funds and the local governments) is estimated as 215 billion ISK in deficit in 2020, equivalent to 7.3% of GDP, compared with a deficit of 46.4 billion ISK in 2019 or 1.5% of GDP.

The general government revenue in current prices decreased by 2.3%, while the expenditure of the general government increased by 10.5% from the previous year.

The general government deficit has not been larger since 2009, but the Covid-19 pandemic has had a significant impact on both general government’s revenue and expenditure. The largest impact is due to the government economic measures in response to Covid-19. Thereof, the partial unemployment benefits, to compensate for a reduction in working time, and wages paid during the notice period were the largest contributors, amounting to 35 billion ISK in 2020. The Unemployment Insurance Fund’s expenditure on general unemployment benefits also increased significantly, from 23 billion ISK in 2019 to 54 billion ISK in 2020 – an increase of 136%.

2008: The Treasury's takeover of lost claims of 192.2 billion ISK due to the Central Bank's mortgage loans are included.
2016: Revenue due to stability contribution of 384.3 billion ISK are included.

Financial balance continues to decrease in 4th quarter of 2020
The financial balance of the general government is estimated to be negative by 33.2 billion ISK in the fourth quarter of 2020, a deficit equivalent to 4.2% of the quarterly GDP. Overall the general government revenues are projected to have increased by 3.1% in the fourth quarter of 2020, while the general government expenditure is estimated to have increased by 12.1%.

General government revenues were 42.4% of GDP
The general government total revenues are estimated to be 1,246.3 billion ISK or 42.4% of GDP in 2020. In comparison, in 2019 the general government total revenues amounted to 1,276.2 billion ISK or 41.9% of GDP. This translates to a government revenue decrease of 30 billion ISK in current prices or 2.3%. The decrease in government revenues can be attributed to a decline in central government revenue.

Revenue due to stability contribution of 384.3 billion ISK are included in 2016.

The central government total revenues are estimated to be 890.4 billion ISK in 2020, as preliminary figures suggest a decrease of 4.8% from the previous year. Local government revenues are estimated to have increased by 5.3% and amounted to 404.4 billion ISK in 2020. The revenues of the social security funds increased by 24.8%, to a total of 361.6 billion ISK in 2020, but 99.5% of the funds are funded through the central government.

Revenue due to stability contribution of 384.3 billion ISK are included in 2016.

Taxes on income increased by 1.5% in 2020
Taxes on income are the largest revenue item in the general government accounts and are estimated to have generated 43.2% of the general government revenues in 2020. In total, revenues from income taxes amounted to 538 billion ISK in 2020, increasing by 1.5% from the previous year. Total income taxes in 2020 amounted to 18.3% of the year’s GDP. Taxes on goods and services decreased by 3.7% in 2020, contributed 26.6% of the total revenue and amounted to 11.3% of GDP.

Revenue due to stability contribution of 384.3 billion ISK are included in 2016.

Government expenditure increased by 10.5% in 2020
General government expenditure is estimated at 1,461.3 billion ISK in 2020, increasing by 10.5% from the previous year. Central government expenditure are estimated to have increased by 12.8%, local government expenditure by 4.9% and social security fund expenditure by 25.6%.

Public consumption expenditure (i.e. wages and salaries, use of goods & services and depreciation, taking into account sales of goods and services) amounted to 808.8 billion ISK or 27.5% of GDP in 2020. An increase of 8.7% compared with the year before, driven by a 9.4% increase in wages and salaries expenditure.

Preliminary figures suggest that public investment expenditure amounted to 104.4 billion ISK in the year 2020, or 3.6% of GDP. As a percentage of GDP in 2020, public investment has remained stable, but at current prices it is estimated that public investment has contracted by 6 billion ISK. This decrease can be attributed to local government investment, which is estimated to have contracted by almost 10 billion ISK between years. It should be noted, however, that local government investment in 2018 and 2019 was considerably higher than in the previous years.

Social transfers to households increased by 31% in 2020, and were 9.9% of GDP compared with 7.3% of GDP in 2019. This increase is largely due to increasing expenditure in unemployment benefits and other expenditure related to Covid-19 measures.

Interest expenditure have decreased significantly over the last years and as a percentage of GDP, 4.0% in 2020 compared with 6.9% in 2015.

The significant growth in public investment in 2018 can partly be explained by the transfer of the Hvalfjarðargöng road tunnel from the private limited company Spölur to the central government.

44% of estimated increase in public health expenditure traced to Covid-19
In 2020, the total government expenditure on health is estimated to have been 248.8 billion ISK, 17% of the total government expenditures. That is an increase of 10.4% from 2019, or 23.4 billion ISK increase. 44% of estimated increase in public health expenditure can be traced to the Covid-19 pandemic.

Health expenditure as a percentage of GDP has increased every year from 2015, equivalent to 8.5% of GDP in 2020 compared with 6.7% in 2015. The relatively large increase between 2019 and 2020 can partly be explained by a decrease in GDP during the period.

Government expenditure on education is estimated at 208.8 billion ISK in 2020, or 14% of total government expenditure. That is an increase of 7.1% from 2019. There is a considerable increase in expenditure on education as a percentage of GDP, but it can also partly be explained by a decrease in GDP during the period.

It is estimated that 51% of the government expenditure on education was allocated towards primary education, or 3.6% of GDP. Tertiary level expenditures were 17% of the total education expenditure or 1.2% of GDP and the upper secondary level expenditures were 16% or 1.1% of GDP.

Government gross debt stood at 115.5% of GDP in 2020
General government net financial assets are estimated to have been negative by 933.5 billion ISK at year-end 2020, equivalent to 31.7% of GDP. General government financial assets amounted to 2,462.0 billion ISK at year-end 2020, or 83.7% of GDP, and total government liabilities amounted to 3,395.5 billion ISK, or 115.5% of GDP compared with 101.2% at year-end 2019. In the period between 2012 and 2018, public debt began to decline, but following the general government deficit in 2019, public debt began to increase again. Debt is estimated to have increased even further in 2020, or by 10.2% from the end of 2019 to the end of 2020.

The general government deficit in 2020 seems to be largely financed by borrowing, but it is estimated that public borrowing at the end of 2020 amounted to 23.9% of GDP for the year, compared with 16.2% at the end of 2019. There is a considerable increase in both domestic and foreign borrowing in the period.

Financial balance for the general government, together with financial assets and liabilities are estimated on the basis of preliminary figures, the results of which will change when the final figures are published in September 2021.

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