Public debt dipped below 50 percent of GDP at end of Q3 2022

Despite the 7-billion budget surplus over the first three quarters, there was an overall increase in public debt over 2022. Government debt amounted to 451 billion euros as of the end of September 2022; this was 2 billion euros higher than at the beginning of the year. The budget surplus was therefore not used to pay debts, but largely ended up in bank accounts and deposits. The balance in bank accounts and deposits was 5 billion euros higher at the end of Q3 than at the beginning of the year.
The decline in the debt ratio was due to GDP increasing more than debt due to inflation. The debt-to-GDP ratio is almost back to its level just before the coronavirus crisis. At the end of 2019, the gross debt ratio still stood at 48.5 percent of GDP.

Public revenue up by 11 percent

Public revenue over the first three quarters of 2022 were up by 31 billion euros on the same period in the previous year, representing an increase of 11 percent. Public expenditure rose less steeply, by 4 billion euros or 1 percent. On balance, the government balance improved by 27 billion euros relative to the first three quarters of 2021, when it was marked by a deficit of 20 billion euros. Last year's budget balance stood at 7 billion euros after three quarters.

Revenues from taxes and statutory contributions increased by 22 billion euros, or 9 percent, in the first three quarters compared to the first three quarters of 2021. This increase is in line with GDP growth. Higher profits, higher wages and prices translate directly into higher tax revenues for the state. Other revenues rose by almost 9 billion euros, up 29 percent. This was mainly due to higher natural gas revenues.

Expenditure up slightly despite COVID-19 subsidies ending

Subsidies, falling under public expenditure, decreased by 13 billion euros over the first three quarters of 2022. The sharp decrease was due to the expiry of coronavirus-related government subsidies such as the NOW (Temporary Emergency Bridging Measure for Sustained Employment) and the TVL (Reimbursement Fixed Costs). Other spending increased on balance by over 16 billion euros. Public employees' pay rose by 8 percent, or 4 billion euros. Spending on social benefits, which also includes public healthcare, rose by 5 billion euros. Furthermore, the government allocated an additional 7 billion euros towards various incidental expenses. For example, state-owned EBN had to incur costs for natural gas storage in the Bergermeer and pay corporate tax on natural gas profits. Incidental expenditure further included several government compensation measures. One example is the compensation to savers for past overpayments of tax on savings as a result of a Supreme court ruling (the so-called Box 3 ruling).

The government balance and the debt-to-GDP ratio are important indicators for the state of public finances in a country. The European convergence criteria allow a maximum deficit of 3 percent of GDP over one calendar year, and a maximum debt level of 60 percent of GDP as at the end of that year. However, the coronavirus pandemic created exceptional circumstances which prompted the European Commission to temporarily suspend its fiscal rules. In its Autumn Memorandum, the Ministry of Finance assumed a government balance for 2022 of -1.0 percent of GDP and a debt level at the end of 2022 of 50.4 percent of GDP.