2022 Budget Bill: Improved Outlook

Vala Hafstað

Finance Minister Bjarni Benediktsson presented the Icelandic government’s budget bill, proposed for 2022, at a press conference yesterday, Morgunblaðið reports. The bill expects a state deficit of ISK 168.5 billion (USD 1.30 billion; EUR 1.14 billion) in 2022, or ISK 55 billion lower than expected in the budget plan approved in the spring.

It looks like the budget deficit for 2021 will amount to ISK 288 billion (USD 2.22 billion; EUR 1.96 billion), which means the budgetary position is expected to improve by ISK 119 billion in 2022, compared with 2021.

An economic growth of 5.3 percent is predicted.

“Income is increasing in society, which generally benefits the state budget directly,” states Ari Skúlason, economist for Landsbankinn. “Unemployment has decreased considerably; the number of tourists is up, and so forth. All of it points in the right direction.” He notes, though, that some uncertainties remain, due to the COVID-19 pandemic, the duration of which no one can predict.

The budget bill’s single largest increase in expenditure, proposed for next year, goes toward healthcare, an increase of ISK 16.3 billion, compared with 2021. As far as government revenue goes, value added tax is the largest revenue source, expected to provide ISK 290 billion, followed by individual income tax, amounting to ISK 218 billion.

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