The official deficit target for general government spending, 5.5 percent of gross domestic product (GDP) for this year, will be missed by a large margin. Instead, the Finance Ministry has now estimated that this year’s budget deficit will be 7.8 percent of GDP. The difference represents around €1.4 billion of extra spending.

The ministry writes in its report on macroeconomic development and changes in public finances in the first half of 2010 and in a prediction of future developments until the end of the year that poor preparation of the budget for 2010 formed a considerable part of the failure to fulfil the budgetary plan.

The wider-than-expected budget deficit can in part be attributed, according to the ministry, to an unrealistic estimate of balanced economic performance by self-governing bodies in the budgetary plan. A shortfall in revenues and an election year for municipalities will in fact contribute to an increase in the deficit of €404 million.

Also, the general government deficit will be wider by approximately €394 million due to drawing of funds carried over from 2009. This volume had not been included in the budgetary plan, although the use of the funds was planned, the SITA newswire wrote.

The latest ministry estimate takes into account the risk of covering the losses of state-run railway companies above the limit of loans provided in 2009, which amounted to €235.9 million; the loss not covered by the budget amounts to €256 million.

Other reasons for the higher deficit were unplanned expenditures stemming from this year's floods in May and June, which are expected to deepen the deficit by about €100 million. The previous government of Robert Fico (Smer) estimated that this year’s budget deficit would reach 5.5 percent of GDP, representing a reduction from 6.8 percent in 2009. However, shortly before the June parliamentary elections, then-finance minister Ján Počiatek admitted that the deficit could exceed 7 percent of GDP.

Source: SITA

Compiled by Zuzana Vilikovská from press reports
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