Fiscal Data

Components of the Total Public Finance Balance

In certain years, public finance developments are significantly influenced by the economic cycle or temporary factors. Due to these factors, the budget balance may not accurately reflect the underlying development of public finance. An indicator that offers a view of public finance developments without these effects is the structural balance.

The general government budget balance can be analytically divided into three components:

  • Structural Balance: This reflects the general government budget performance after excluding impacts of the economic cycle and one-off measures. The Council for Budget Responsibility (CBR) bases its structural balance estimates on the published methodology The True Deficit.
  • Cyclical Component: This captures the response of revenue and expenditure to fluctuations in the economic cycle, allowing automatic stabilizers to operate freely. The state of the economic cycle — whether underheating or overheating relative to potential growth—is represented by the output gap indicator, which CBR calculates in accordance with its methodology Finding Yeti.
  • One-off Effects: These are government interventions and other temporary impacts that do not affect subsequent years’ performance and are not included in the structural balance.