DREM releases Public Expenditure Statistics for 2010-2021

The Regional Directorate of Statistics of Madeira (DREM) is releasing a set of information today regarding the public expenditure of the Regional Administration of Madeira from 2010 to 2021. The information is based on the 2016 base of the Portuguese National Accounts. This release includes not only the most recent year with available information (2021) but also, for the first time, data for the period 2010-2015.

The data is consistent with the Accounts of Public Administrations for the second notification of 2022 concerning the Excessive Deficit Procedure, which was published in late September. The data from 2010 to 2020 represents final information, while the data for 2021 is provisional.

The conceptual framework of public expenditure statistics and the adopted terminology are based on the European System of Accounts (ESA 2010) and the Manual on Government Finance Statistics (GFSM) for the classification of public expenditure by functions (COFOG). It is important to note that the institutional subsector of the Regional Administration of Madeira (ARM) includes the Regional Government, Autonomous Services, and Funds, which encompass, for example, Public Institutes and Reclassified Companies within the scope of Public Administrations.

Aggregate public expenditure - Marginal Impact on GDP Share as Regional Expenditure Rises in 2021

In 2021, the nominal value of ARM's public expenditure reached 1,647.5 million euros, showing a 9.5% increase compared to the previous year. However, due to the strong recovery of the Gross Domestic Product (GDP) in 2021, the share of regional public expenditure in GDP decreased by 0.1 percentage points (pp) to 33.7%. In the country as a whole, this ratio was 47.7% in 2021, which represents a decrease of 1.5 pp compared to the previous year.

The difference between the share of public expenditure in the ARM and the total of Public Administrations can be explained by the broader areas of intervention for the State. For instance, the Region has no involvement in the Defence function, and in the case of Security and public order, only civil protection falls under the responsibility of the ARM, while the courts, police, and prison establishments are handled at a different level. The difference is also influenced by Social Security expenses, which are not included in the ARM's aggregate but are part of the total of Public Administrations.

After consecutive increases from 2018 to 2020, with regional public expenditure as a percentage of GDP reaching 33.8% in the latter year (largely due to a sharp 13.2% decrease in nominal GDP in 2020 caused by the pandemic), there was a slight decrease of 0.1 percentage points in 2021, as mentioned earlier.

It's important to note that in both 2020 and 2021, public expenditure included significant amounts related to the fight against the COVID-19 pandemic, amounting to 234 million euros and 143 million euros, respectively, in Public Accounting terms.

Classification of expenditure by economic function - Investment surges with 32.7% growth in 2021

In terms of the economic classification of public expenditure, the three largest components are wages, social benefits, and intermediate consumption. In 2021, these components represented 13.9%, 5.8%, and 5.4% of GDP, respectively. Regarding total expenditure, their shares were 41.4%, 17.3%, and 16.1%, in the same order.

Investment stands out as a category, experiencing an increase of 38.3 million euros compared to 2020, amounting to a growth rate of 32.7%. Property income, mostly consisting of paid interest, also increased by 17.0 million euros (+33.3%).

In 2021, expenditure on wages reached a total of 682.6 million euros, marking a 6.0% increase compared to 2020. Social benefits, on the other hand, increased by 5.9% to 284.9 million euros during the same period. Intermediate consumption amounted to 265.5 million euros in 2021, reflecting a decrease of 5.7% compared to the previous year.

The investment of the Autonomous Region of Madeira accounted for 3.2% of GDP in 2021, totalling approximately 155.4 million euros. Debt interest, amounting to 88.0 million euros, represented 1.4% of GDP in the same year.

Expenditure classification by functions - Education and Health Nearly Tied for the Highest Expenditure Share

In addition to the economic classification, public expenditure can also be classified by functions using the COFOG system, following the SEC2010 guidelines. This functional classification provides insights into the purposes of expenditure and enhances the analytical framework for assessing the quality of public expenditure.

Regarding public expenditure, the functions of Education and Health had the highest share of GDP in 2021, both at 7.9%. They were followed by Economic Affairs, General public services (including paid interest), and Social Protection, representing 7.6%, 4.1%, and 3.4% of GDP, respectively. In terms of total expenditure, Health and Education accounted for 23.6% and 23.5%, respectively. Economic Affairs, General public services, and Social Protection represented 22.5%, 12.1%, and 10.0% of total expenditure, respectively.

Analysing the changes in expenditure by major functions between 2020 and 2021, there were increases observed in Environmental protection (+41.2%), Economic Affairs (+29.1%), Housing and collective infrastructure (+16.8%), Security and public order (+9.2%), Education (+6.0%), and Social Protection (+5.9%).

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