The financial balance of the general government (i.e. central government, social security funds and local governments) was 85.9 billion ISK in deficit in 2023, equivalent to 2.0% of GDP. In comparison the deficit in 2022 amounted to 155.0 billion ISK or 4.0% of GDP. The general government revenues in current prices increased by 223.2 billion ISK from the previous year, which amounts to 13.5% increase, while the expenditure of the general government increased by 154.0 billion ISK or 8.5% from the previous year.
General government revenues 43.5% of GDP
The general government total revenues amounted to 1,880.4 billion ISK in 2023, which amounts to 43.5% of GDP. In comparison, the government total revenues amounted to 1,657.2 billion ISK in 2022 or 42.6% of that year's GDP.
The central government total revenues increased by 13.5% in 2023 and amounted to 1,380.2 billion ISK. During the same period, local government revenues increased by 13.7% and amounted to a total of 556.3 billion ISK. The social security funds are financed by transfers from the central government.
Taxes on income and profits, which is the general government’s largest revenue item, generated 43.8% of total revenue in 2023. In total, the revenue of taxes on income and profits amounted to 822.8 billion ISK in 2023 and increased by 16.5% from the previous year. General government revenues from taxes on goods and services increased by 12.6% year-on-year, amounting to 496.1 billion ISK or 26.4% of total revenue of the general government. Overall, general government tax revenues increased by 14.8% in 2023.
Statistics Iceland’s treatment of general government accounts is according to the European System of Accounts (ESA2010). The treatment of the sale of assets and income from associated companies and joint ventures differs from the treatment of the governments accounts and municipalities. In Statistics Iceland's general government accounts, income from the sale of assets, share of income and changes in the value of assets are only recognised in the balance sheet. Revenues from publicly owned companies are only recognised as an income in the form of dividends up to a maximum of the previous year's profit.
Government expenditure at 45.5% of GDP
General government expenditure amounted to 1,966.2 billion ISK in 2023, or 45.5% of GDP. In comparison, the general government total expenditure was 1,812.2 billion ISK in 2022 or 46.6% of GDP. Central government expenditure increased by 7.4% year-on-year, local government expenditure by 9.5% and social security expenditures by 5.4%.
Net government expenditure, after deducting revenues from the sale of goods and services, amounted to 1,855.5 billion ISK in 2023. The majority of general government expenditure goes towards government final consumption (i.e. wages and salaries, use of goods and services and depreciation, taking into account sales of goods and services), which amounts to 58.5% of net expenditures. Government final consumption amounted to 1,084.6 billion ISK in 2023, an increase of 8.8% year-on-year. Social benefits amounted to 15.8% of net government expenditure in 2023 or 293.7 billion ISK, an increase of 3.5% from previous year in current prices. Subsidies, grants and other expenses amounted to 9.0% of net government expenditure. There was a significant increase in other expenses, current and capital transfers, due to natural disasters in 2023.
General government investment in current prices increased by 9.8% year-on-year and amounted to ISK 176.1 billion ISK in 2023. After accounting for depreciation, net government investment amounted to 77.6 billion ISK in 2023 or 4.2% of net government expenditure.
General government interest expenditure amounted to 12.5% of net government expenditure, or 232.2 billion ISK in 2023, an increase of 4.0% from 2022 in current prices. It should be noted that the scope of the general government sector, as according to European System of Accounts (ESA2010), includes housing and student loan funds owned by the central government. These funds have a substantial impact on interest income and interest expenditure of the general government.
General government expenditure by function
The largest category in general government operations, accounting for 24.5% of net government expenditure, is social protection. A total of 454.2 billion ISK was allocated to this category in 2023, which amounts to 10.5% of the year’s GDP.
The second largest category in general government operations is health care, which accounted for 18.2% of net government expenditures in 2023, amounting to 338.2 billion ISK or 7.8% of the year’s GDP.
General government expenditure on education amounted to 266.4 billion ISK in 2023, which is 14.4% of net government expenditure or 6.2% of the year’s GDP. Over half of general government net expenditure on education was allocated towards primary education, 17.1% of government net expenditure on education went to the tertiary education, 14.3% to the upper secondary education and 12.2% to the pre-primary education.
Government gross debt at 94.4% of GDP by 2023
Net financial assets of the government sector were negative by 1,552.6 billion ISK at the end of 2023. Whereof, total government gross debt amounted to 4,079.5 billion ISK or 94.4% of GDP. Total government gross debt in current prices has increased from the previous year, although as a percentage of GDP there is a slight decrease in gross debt. General government financial assets amounted to 2,526.9 billion ISK by the end of 2023, or 58.5% of GDP.