THE DEBT of Slovakia reached its highest level ever in the first quarter of the year. It stood at 58.4 percent of GDP, which amounts to €42.3 billion, the Eurostat statistics office informed. Regarding the country’s commitments to the European Union as well as investors, it will be more important, however, to see what the debt will be at the end of the year, the Sme daily reported in its July 23 issue.

At the end of last year, public administration debt stood at 55.4 percent. Since it exceeded 55 percent, the government had to apply the debt brake, meaning it had to freeze 3 percent of budget expenditures, i.e. about €305 million.

During the first three months of 2014, the debt rose to more than 58 percent, mostly due to the state using advantageous conditions on the market and borrowing money, the Finance Ministry explained.

“By the end of 2014, we expect a gradual drop in debt,” the ministry claimed, as quoted by Sme.

The government hopes to keep the debt slightly above 55 percent by December. It plans to remove the agency for emergency reserves of oil from the state finances, and also decrease the cash reserve.

On the other hand, the debt might be negatively affected by economic growth in the second half of the year, in addition to prices and the deficit, said Andrej Arady, analyst with VÚB bank.

Moreover, Eurostat’s methodology is also set to change in the autumn. Yet, if it does not change the way it calculates GDP, Slovak debt would surely increase compared to economic performance, Sme wrote.

If the debt does not fall below 57 percent, the government will have to prepare a balanced budget for next year, as stipulated by the law on budgetary responsibility.

Source: Sme

Compiled by Radka Minarechová from press reports

The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.