The financial balance of the general government (i.e. the central government, the social security funds and the local governments) was 258 billion ISK in deficit in 2021, equivalent to 7.9% of GDP, compared with a deficit of 262 billion ISK in 2020 or 8.9% of GDP. The general government revenues in current prices increased by 9% and the expenditure of the general government increased by 7.2% from the previous year.
When comparing amounts as a percentage of GDP, it should be noted, that the national product decreased in real terms by 6.8% in 2020.
General government revenues were 41.3% of GDP
The general government total revenues amounted to 1,342.5 billion ISK in 2021, or 41.3% of GDP. In comparison, in 2020 the general government total revenues amounted to 1,231.5 billion ISK in 2020, or 41.9% of that year's GDP.
The central government total revenues increased by 9.6% in 2021 compared with the previous year and amounted to a total of 949.7 billion ISK. At the same time, local government revenues increased by 6.9% and amounted to a total of 432.7 billion ISK. The revenues of social security funds increased by 7.5% and amounted to a total of 385 billion ISK in 2021. Social security is financed by transfers from the treasury.
Taxes on income and profits is the general government largest revenue item and it generated 42.4% of the total revenue in 2021. In total, the revenue of taxes on income and profits amounted to 569.4 billion ISK in 2021 and increased by 5.1% from the previous year. General government revenues from taxes on goods and services increased by 13.6% year-on-year. Taxes on goods and services amounted to 378.6 billion ISK during the year, or 28.2% of the total revenue of the general government. Overall, general government tax revenues increased by 7.2% in 2021, which is a large increase from the previous year when they increased by 0.8% year-on-year.
Government expenditure at 49.2% of GDP
General government expenditure amounted to 1,600.7 billion ISK in 2021, or 49.2% of GDP and increased by 7.2% year-on-year. In comparison, the general government total expenditure increased by 13.3% in 2020. Central government expenditure increased by 6.3% in 2021, from the previous year, local government expenditure by 6.3% and social security funds expenditures by 7.8%.
Public consumption expenditure (i.e. wages and salaries, use of goods & services and depreciation, taking into account sales of goods and services) amounted to 892.5 billion ISK or 27.5% of GDP in 2021. Public consumption expenditure increased by 9% compared with the year before, mostly driven by an 8.1% increase in wages and salaries expenditure. The share of wages and salaries is the largest component in public consumption expenditure, or around 57%.
Public investment expenditure in current prices increased significantly or by 26.3% in 2021 and amounted to 143.4 billion ISK. The central government expenditure on investments increased the most or by 27.4% and local government expenditure also increased considerably, or by 23.4%.
Social transfers to households increased by 4% in 2021 compared with a 32.5% increase the year before. The Unemployment insurance fund weighs heavily in social transfers.
In current prices, general government interest expenditure has been decreasing since 2015 and, as a percentage of GDP, since 2012. General government interest expenditure, as a percentage of GDP, amounted to 3.4% in 2021 compared with 8.9% in 2012.
General government expenditure by expenditure categories
The largest category in general government operations is social protection, social security funds and welfare. Total of 430.2 billion ISK went to this category in 2021, which amounts to 28.4% of the net expenditures of the general government in 2021.
The second largest category in general government operations are health issues which accounted for 18.3% of the general government net expenditures in 2021. A total of 277.6 billion ISK went to health issues during the year, or 8.5% of the year's GDP. This is an increase of 14.7% from last year, at the current price level.
General government net expenditure on education amounted to 232.9 billion ISK in 2021, or 15.4% of net general government expenditure. General government expenditure on education, as a percentage of GDP, amounted to 7.2% in 2021. Almost half of general government net expenditure on education was allocated towards primary education, 18.9% of general government net expenditure on education went to the tertiary education, 14.9% to the upper secondary education and 11.5% to the pre-primary education.
Government gross debt stood at 110.3% of GDP in 2021
The general government financial assets amounted to 2,435 billion ISK at the end of 2021 or 74.9% of GDP compared with 81.9% at the end of 2020. The total general government liabilities amounted to 3,585.9 billion ISK at the end of 2021 or 110.3% of GDP. In comparison, the total general government liabilities amounted to 3,338 billion ISK in 2020 or 113.6% of GDP.
General government outstanding loans amounted to 734 billion ISK in 2021 or 22.6% of GDP, of which domestic loans accounted for 11.6% of GDP and foreign loans for 11% of GDP. By comparison, general government outstanding loans amounted to 617 billion ISK in 2020 or 21% of GDP.