In the second quarter of 2021, the financial balance of the general government (i.e. the central government, the social security funds and the local governments) is estimated at 88.2 billion ISK in deficit, amounting to 11.1% of quarterly GDP.
Overall, general government revenues are estimated to have increased by 6%, compared with last year’s corresponding quarter, of which the increase in tax revenue was 7.2%. Revenues from taxes on income, profit and capital gains increased by 8.4% during the same time.
Total expenditure is estimated to have increased by 5.1% from last year’s corresponding quarter. Compensation of employees is the largest part of expenditure, estimated at 33.5% of total general government expenditure. Social benefits are estimated to have decreased by 1.6% compared with the second quarter of 2020, while other transfers increased by 23.6% during the same period.
| General government finances in 2nd quarter | |||
| 2020 | 2021 | ||
| Billion ISK, current prices | 2nd quart. | 2nd quart. | Change % |
| Total revenue | 294.5 | 312.1 | 6.0 |
| Total expenditure | 380.9 | 400.4 | 5.1 |
| Investment | 25.7 | 30.1 | 17.3 |
| Financial balance | -86.4 | -88.2 | • |
| Financial bal. % of total revenue | -29.3 | -28.3 | • |
| Financial bal. % of quarterly GDP | -12.2 | -11.1 | • |
Covid-19 still had an effect in the second quarter
The Covid-19 pandemic continued to have an effect on public finances in the second quarter, reflecting the negative financial balance. The effect was mainly reflected in the Unemployment Insurance Fund's expenditures, increased public expenditures due to transfers to companies, the loss-of-income transfers and relief grants transfers which amounted to around 5.2 billion ISK in the second quarter. Various government measures were still active in the 2nd quarter of 2021, including business closure grants, travel gifts, quarantine payments, child benefit supplements and the “Everybody works” campaign, a temporary increase in VAT refund rate.
Preliminary figures for 2021