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Deficit may increaseBusiness in short
28 Apr 2014 Compiled by Spectator staff Business
THOUGH recently published data from the Eurostat statistics office confirmed that Slovakia’s budget deficit for 2013 dropped below 3 percent of GDP, this may change in autumn as Eurostat will probably not accept the roughly €200 million that was moved from the second, private pension pillar.
The fiscal deficit for 2013 stood at 2.77 percent of GDP, Finance Minister Peter Kažimír told the press on April 23, stressing that this is even better than their original expectations.
“We are not losing credibility on financial markets, we do not need to be worried about penalties from the European Union and the funding of businesses and households is not in jeopardy either,” Kažimír said, as quoted by the TASR newswire. He also praised the fact that Slovakia slashed its structural deficit too, from 3.8 percent of GDP in 2012 to 1.9 percent last year.
However, the deficit may be recalculated and raised in autumn as Eurostat plans to introduce a stricter methodology for assessing budget deficits of EU-member countries. It will, for example, not recognise transfers of people’s savings from the private, second pillar of the pension system to state-run insurer Sociálna Poisťovňa. This means that the country’s deficit may exceed 3 percent of GDP, TASR wrote.
If this happens, Slovakia will not have to decrease VAT from 20 to 19 percent as of January 2014. The government of Iveta Radičová, which increased the tax, passed a law saying that VAT will decrease as soon as the deficit falls below 3 percent, Sme wrote.
Kažimír said he still does not know the final deficit numbers. The target of keeping the deficit below 3 percent of GDP could be helped by revenues from corporate income tax, he said.
Eurostat also revealed that Slovakia’s debt rose to 55.4 percent, which means that the Finance Ministry will now have to cut state expenditures by 3 percent, i.e. about €300 million, as of May 15.
Moreover, the constitutional debt brake law requires the government to submit a budget for next year where expenditures will be identical to this year’s budget. This means that the volume of spending will be frozen, Kažimír said, adding that the debt brake does not change the government’s objectives for the deficit and the debt planned for next year, as reported by TASR.
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