Long-term projection of budget trends in Bavaria up to 2020

In light of the insecurity regarding the development of future revenue and spending for the Free State of Bavaria, the Dresden Branch of the Ifo Institute conducted for the Bavarian State Ministry for Economic Affairs, Infrastructure, Transport and Technology a study on budget consolidation, infrastructure and industry-site competition. The study made use of the results of the latest tax revenue forecast of November 2010. On the basis of the underlying assumptions on the development of revenue and expenditures, the study concluded that a balanced budget could be achieved by 2014. At the same time, it must be kept in mind that long-term forecasts do not contain any further cyclical effects. Using the long-term growth path as a starting point, neither boom phases nor recessions are accordingly included. The forecast also does not contain, for example, any further liabilities of the BayernLB or other budgetary burdens. Also, the study does not assume any intensification of consolidation measures beyond those contained in present reform plans. Still, even this basic projection shows that Bavaria may be faced with the need for further consolidation in the coming years. For this reason it is important that sustainable economic and budgetary policies continue to be pursued.