C 312/150
EN
Official Journal of the European Union
1.9.2023
(21)
In 2023, the fiscal stance is projected in the Commission’s 2023 spring forecast to be expansionary (‒ 1,5 % of GDP), in a context of high inflation.
This follows an expansionary fiscal stance in 2022 (‒ 0,9 % of GDP).
The growth in nationally financed primary current expenditure (net of discretionary revenue measures) in 2023 is projected to provide an expansionary contribution of 1,3 percentage points to the fiscal stance.
This includes the increased cost of the targeted support measures to households and firms most vulnerable to energy price hikes by 0,3 % of GDP.
The expansionary contribution of nationally financed net primary current expenditure is therefore only partly due to the targeted support to households and firms most vulnerable to energy price hikes.
The expansionary growth in nationally financed primary current expenditure (net of discretionary revenue measures) is also driven by, among other factors, social benefits other than in kind, subsidies related to untargeted energy measures, permanent increases in public sector wages, a one-time contribution to the Union budget, and the reduction in VAT rates.
In sum, the projected growth of nationally financed primary current expenditure is not in line with the Council Recommendation of 12 July 2022.
Expenditure financed by grants under the Facility and other Union funds is projected to amount to 0,2 % of GDP in 2023, while nationally financed investment is projected to provide an expansionary contribution to the fiscal stance of 0,1 percentage points.
Luxembourg plans to finance additional investment through the Facility and other Union funds, and it is projected to preserve nationally financed investment (15).
It plans to finance public investment for the green and digital transitions, and for energy security, such as electrification of public transport, reinforcement of the tram and rail network, a climate and energy fund to support the acquisition of photovoltaic panels, digitalisation of public services and digital communication security (quantum technology), which are partly funded by the Facility and other Union funds.
(22)
According to the 2023 Stability Programme the general government deficit is expected to increase to 1,7 % of GDP in 2024.
The increase in 2024 mainly reflects the extension of support measures to cushion households and corporate incomes against the effects of the inflationary surge.
According to the 2023 Stability Programme, the general government debt-to-GDP ratio is expected to increase to 27,5 % at the end of 2024.
On the basis of policy measures known at the cut-off date of the forecast, the Commission’s 2023 spring forecast projects a government deficit of 1,5 % of GDP in 2024.
This is slightly lower than the deficit projected in the 2023 Stability Programme, mainly due to a smaller increase in compensation of employees and social transfers, according to the Commission’s 2023 spring forecast.
The Commission’s 2023 spring forecast projects a lower general government debt-to-GDP ratio, of 27,0 % at the end of 2024.
(23)
The 2023 Stability Programme envisages the extension of the energy support measures until the end of 2024.
The Commission currently assumes the net cost of energy support measures at 0,5 % of GDP in 2024 (16), compared to 1,1 % of GDP in 2023.
Those estimates are based on the assumption of no renewed energy price increases.
The energy support measures that are currently planned to remain in place in 2024 do not appear to be targeted at vulnerable households or firms.
Most of them do not fully preserve the price signal to reduce energy demand and increase energy efficiency.
(24)
Regulation (EC) No 1466/97 calls for an annual improvement in the structural budget balance toward the medium-term budgetary objective, with 0,5 % of GDP as a benchmark (17).
Taking into account fiscal sustain­ ability considerations, an improvement in the structural balance of at least 0,3 % of GDP for 2024 would be appropriate, according to the Commission.
To ensure such an improvement, and in accordance with the Commis­ sion’s methodology, the growth in net nationally financed primary expenditure (18) in 2024 should not exceed 4,8 %, as reflected in this Recommendation.
At the same time, the remaining energy support measures (currently estimated by the Commission at 1,1 % of GDP in 2023) should be phased out in 2023, if energy-market developments so permit and starting with the least targeted measures, and the related savings should be used to reduce the government deficit.
According to Commission estimates, this would lead to a growth in net primary expenditure below the recommended maximum growth rate for 2024.
However, according to the Commission’s 2023 spring forecast, the growth in net national financed primary current expenditure in 2023 is not in line with the Council Recommendation of 12 July 2022.
If this is confirmed, lower growth in net primary expenditure in 2024 would be appropriate.
(15) Other nationally financed capital expenditure is projected to provide a neutral contribution to GDP.
(16) The Commission’s definition of energy measures only includes fiscal policy measures directly affecting energy prices or providing temporary income support for energy consumption.
General inflation support measures are not classified as energy measures, which explains a difference in the estimated budgetary cost of energy support measures between the 2023 Stability Programme and the Commission’s 2023 spring forecast.
(17) Article 5 of Regulation (EC) No 1466/97 also requires an adjustment of more than 0,5 % of GDP for Member States with a government debt exceeding 60 % of GDP, or with more pronounced debt sustainability risks.
(18) Net primary expenditure is defined as nationally financed expenditure net of discretionary revenues measures and excluding interest expenditure and cyclical unemployment expenditure.