Govt publishes €88.1b draft budget for 2025 with €12.2b deficit

The four-party alliance right-wing on Thursday published the draft budget of EUR 88.1 billion for 2025 with a deficit of EUR 12.2 billion, said the Ministry of Finance in a press release.

The estimated deficit is EUR 0.6 billion lower than in the current year when taking into account the second supplementary budget for 2024.

The deficit will decrease due to measures taken by the Government to strengthen general government finances. Without these, the deficit for 2025 would be just under EUR 16 billion.

The Government’s economic policy priorities are economic stability, employment, economic growth and safeguarding welfare services. The goal is to stabilise the general government debt ratio by 2027.

The Government decided in the Government Programme on a package of measures, including both savings measures and structural policy measures to increase employment, that would strengthen general government finances by EUR 6 billion.

Additionally, in the spring 2024 session on spending limits, the Government decided on spending cuts and tax measures that would boost general government finances by a total of EUR 3 billion.

The draft budget includes more than EUR 100 million in new savings to compensate for the shortcomings.

The compensation measures include, among others, a reduction in central government funding for church and religious activities and for the social duties of the Evangelical Lutheran Church (EUR -20 million), the coeliac allowance (EUR -9 million), changes to the municipality categories for the housing allowance (EUR -2.7 million), the hepatitis C eradication programme (EUR -3.7 million) and an increase in revenue recognised from Metsähallitus (EUR +6 million).

In addition, the implementation of the savings targeted at reimbursement for the cost of social assistance during integration will be adjusted so that the agreed savings (EUR -58 million) can be realised in full.

The draft budget for 2025 totals EUR 88.1 billion, which is EUR 0.1 billion higher than the sum budgeted for 2024, including the second supplementary budget.

The growth in expenditure is explained by the ex-post control of the funding of wellbeing services counties and by the index adjustments to statutory and agreement-based indexed expenditure. At the same time, the Government's savings decisions have reduced the level of expenditure.

Compared with the General Government Fiscal Plan drawn up in spring 2024, the Ministry of Finance's draft budget includes additional discretionary expenditure of EUR 13 million.

Compared with the spring's General Government Fiscal Plan, the deficit has grown by EUR 1.5 billion. Tax revenue estimates have decreased by around EUR 1 billion compared with the estimates drawn up in the spring. This decrease for 2025 is explained by lower than predicted tax revenue in 2024 and the decision to bring forward the increase in the excise duty on tobacco products to November 2024, which will move an estimated EUR 0.45 billion of tax revenue from 2025 to 2024. Further reasons include an increase in the estimated debt interest payments in line with the forecast updated at the beginning of summer. Interest expenditure on central government debt is estimated at EUR 3.5 billion in 2025.

As the measures taken by the Government to strengthen general government finances will enter into force gradually during the parliamentary term, the impact of the adjustment measures will not be felt fully in 2025.

The draft budget includes savings that will reduce on-budget expenditure by just under EUR 2 billion, in addition to which the tax adjustment measures will increase tax revenue by about EUR 1.2 billion. However, the impact of tax revenue for 2025 will be weakened by the transfer of around EUR 0.45 billion of tax revenue to 2024 due to the increase in the excise duty on tobacco products taking place earlier than planned.

Implementation of growth measures decided on in the Government Programme and the government session on spending limits press ahead