2022 Budget Bill: Treasury Deficit but Economic Growth Expected Skip to content

2022 Budget Bill: Treasury Deficit but Economic Growth Expected

By Yelena

Prime Minister Bjarni Benediktsson
Photo: Golli. Bjarni Benediktsson.

The Icelandic government’s 2022 budget bill projects more economic growth next year than previously expected. The budget nevertheless assumes a state treasury deficit of ISK 169 billion [$1.3 billion, €1.1 billion] next year, though it is ISK 120 smaller than the deficit expected this year (ISK 288 billion). Finance Minister Bjarni Benediktsson presented the government’s 2022 budget bill this morning as well as the government’s financial policy for 2022-2026.

Iceland’s economy will grow by 5.3% next year and GDP is expected to exceed pre-pandemic levels. The bill provides for a continued increase in healthcare expenditures, a further increase in disability and rehabilitation pensioners’ benefits, a doubling of the retirement income limit for old-age pensioners, continued reimbursement of research and development costs, and raised child benefits.

Long-term unemployment and inflation remain challenges

While economic forecasts have improved and unemployment has decreased since the heights reached during the pandemic, the budget bill warns that there is a risk that long-term unemployment remains at higher levels than before the pandemic. Inflation is also expected to remain at high levels in the coming months, another challenge for the country’s economy.

“The post-pandemic resurrection of the economy and Government finances is the most important task at the beginning of this electoral term,” a government notice on the budget bill states. “It is vital to return the Treasury to a position of strength and ensure long-term fiscal sustainability.”

Investment in healthcare

The largest single investment project in the budget bill is the construction of a new National University Hospital, with ISK 14 billion [$108 million, €95.1 million] set aside for the project in 2022. Contributions to healthcare overall will increase by ISK 16.3 billion [$125.7 million, €110.7 million], according to the bill.

Gender equality analysis conducted on budget

For the first time in Iceland’s history, the budget bill’s contents were assessed on the basis of gender equality. The vast majority of the bill’s measures were assessed on this basis. The majority of the measures assessed were considered to promote gender equality, though a large proportion was considered to maintain the status quo. A small proportion was considered likely to increase the gender gap.

A more detailed English-language overview of the budget bill is available on the Government of Iceland website.

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