The overall outcome of Part A-1 of the Government accounts for 2022 is nearly ISK 100m more favourable than was provided for in the 2022 National Budget, and about ISK 50bn better than estimated in late 2022. The overall outcome was negative by just under ISK 89bn, well below the estimated ISK 186bn deficit assumed in the National Budget. The primary balance is now positive by ISK 6.7bn, whereas it was projected to be negative by ISK 131bn according to the National Budget as approved by Parliament. The improvement therefore amounts to nearly ISK 138bn. The primary balance is the Treasury outcome before tax income and expenditures.
The results of the Government accounts for 2022 have now been published, and the accounts have been sent to Parliament.
The post-pandemic economic recovery in 2022 was strong in Iceland. GDP growth was strong, and unemployment fell swiftly. As the economy rebounded, inflation rose in Iceland, as it did in most other economies. The results of the Government accounts show clear signs of the economic recovery.
Strong fiscal performance
“The outcome is far more favourable than we dared hope just a few quarters ago. The operational deficit is shrinking apace, and the debt ratio has improved markedly. We are on the right path,” says Minister of Finance and Economic Affairs Bjarni Benediktsson about the Government accounts.
“Government revenues have rebounded due to a strong balance sheet and spending consolidation. This cautious policy has eased demand pressures and fostered greater fiscal equilibrium,” says the Minister.
The results pave the way to further progress and improvement in Government performance alongside continued work to contain the overheating of the economy. Declining Government debt ratios create the conditions to lower interest expense once again and to ensure that the Government is able to respond to economic shocks without jeopardising confidence and sustainability.
A solid footing and reduced debt
At the beginning of the electoral term, the Government set the target of supporting the economy until it had regained a solid footing. Thereafter, emphasis was placed on halting debt accumulation and steadily improving Government performance so that the Government debt-to-GDP ratio would stop increasing no later than at year-end 2026. At the same time, it would be ensured that the fiscal rules laid down in the Act on Public Finances could take effect that same year, after having been temporarily postponed during the COVID-19 crisis.
“A rapid economic recovery confirms the decisions that were taken at the onset of the pandemic – that the Government should support households and businesses while the pandemic was ongoing – and that conditions should be created for a strong recovery when the pandemic had passed,” said the Minister of Finance and Economic Affairs.
“These results support the plans unveiled by the Government in the spring, which entailed expediting the fiscal rules so that they would take effect in 2025.”
Major changes due to the implementation of international financial reporting standards make it more difficult to compare Government accounts between years. This year, the accounts are presented as the consolidated results of Parts A and B of the Government accounts, in accordance with the implementation plan for international financial reporting standards. The combined results for Part A and Part B were negative by ISK 175bn. The results for Part A-1 are shown in Summary 1 and are comparable to those for prior years.