Blümel Comments on Budget 2020: Volatile Figures
Budgetary decision delivers security for ministries - governing parties effect amendment authorising transitional Covid-19 budget to overrun
Vienna (OTS) - “Any number we apply today will ultimately turn out to be wrong. Therefore, entirely different standards apply to this year’s budget than to previous ones. Crisis management has top priority. Current budget figures can be likened to constantly changing snapshots. What counts is healthy people, safeguarded jobs and averted insolvencies. 2020 is not only the year of crisis, but also of the start of a comeback for Austria”, Finance Minister Gernot Blümel said in parliament about the upcoming budget process.
During budget negotiations at the beginning of the year, Austria’s economic growth was still forecast at 1.2 percent. As recently as the beginning of March, an economic research institute stated that the business climate index was not yet showing any effects of the coronavirus epidemic. Just one day later, the same institute predicted an economic growth rate of only 0.8 percent. That was one week before the originally planned budget speech, and these figures are therefore reflected in the draft budget. Four days later, on 14th March, the Austrian government put together an emergency aid package of four billion euros because the economy had suffered a massive downturn. Another four days on, due to the rapid global spread of the virus, a 38 billion euro aid package was assigned to the Austrian economy to protect the health of Austrian citizens, safeguard jobs and prevent companies from going bankrupt. Since then, over 18 billion euros have been made available from the 38 billion package in the form of emergency funding and relief payments.
The huge demand for corona short-time working and associated budget requirements alone show how volatile forecasts and planning have become in the time of Covid-19. On 14th March, jointly with our social partners, we presented corona short-time working, which was budgeted at 400 million euros. Within a very short time, funds had to be increased several times over due to the great demand. “By now, we have reached a short-time working budget of 10 billion euros. By comparison, during the economic crisis of 2009, around 120 million euros were paid out at the peak of short-time working. The current measures have allowed 1.2 million Austrians to keep their jobs”, said the Finance Minister.
Currently, budget-relevant criteria are changing almost daily and the forecasts of economic researchers worldwide offer anything but a uniform picture of the situation. The economic research institute WIFO is currently predicting an economic slump of -5.25 percent of GDP as a best case scenario and up to -7.5 percent at worst. The International Monetary Fund is forecasting -7 percent while the Austrian National Bank is expecting a minus of 3.2 percent. Forecasts from the three largest banks in Austria similarly range from
-3.1 percent (Erste) and -4.5 percent (Raiffeisen) to -9 percent (Bank Austria).
Amendment to the Covid-19 transitional budget
“The only thing that’s clear is that nothing is clear and that the situation must be reassessed daily. Whatever figures are adopted in the budget now are not likely to stand. Nevertheless, the current budgetary decision is essential since clear priorities have been set in negotiations with the individual ministries to ensure adequate financial provision where it is needed. Economic researchers believe that autumn will be the time for a more conclusive assessment of the costs of the corona crisis”, said Blümel. The governing parties have agreed an amendment to clarify that this year’s budget is a Covid-19 transitional budget, which includes the authorisation to overrun where necessary to deal with the crisis.
Due to the premature dissolution of the National Council, no Federal Finance Act 2020 was passed in autumn 2019, and so the federal budget is being implemented based on the interim budget and the budget of 2018. This is due to be replaced by the Federal Finance Act 2020 in order to maintain the ministries’ capacity to act.
The outbreak of the COVID-19 pandemic changes the political, economic and social framework conditions and also impacts the original budgetary policy plans. Due to the current measures, the originally anticipated 300 million euro budget surplus is certainly no longer viable. This year, the budget will instead show a deficit of an as yet unknown figure. The effects of COVID-19 that were foreseeable at the time of presentation have been included as a preliminary step. In addition, there is the 28 billion that was unanimously approved by the National Council as expenditure authorisation. However, unforeseeable expenses potentially required for the fight against the consequences of the virus do not feature in the budget. Similarly, any possible measures to support the “Comeback for Austria” promised by the federal government cannot be reflected in the budget at this point in time.
Present draft budget provides more money for police, armed forces, the legal system and climate protection
“It is not yet known how much help will be needed for the people and the region. We are doing the utmost to avert worst case scenarios”, said the Finance Minister. Despite the current uncertainties, it is vital that the present budget is approved since it provides financial security for many important measures and projects of the individual ministries. For example, additional funds are being made available to the police and armed forces, such as for law enforcement and the purchase of vehicles. Within the legal system, increased funds will allow for the financing of about 40 prosecutors and 150 additional support staff. Further, the budget includes additional funds for rural areas and protection against natural hazards (70 million), while funds for environmental, climate and energy measures are increased by almost 70 percent in 2020 (175 million). “Many of the priorities that were negotiated at the beginning of the year are helpful in the current crisis situation. The armed forces, police and the legal system are significantly strengthened while the climate, health and social sectors all receive more funding. At the same time, we are giving the various ministries more financial leeway to implement important projects for Austria. While the forecasts are volatile, the prospects for an economic comeback are all the clearer”, concluded Blümel.