IFP: Last year’s consolidation reduced GDP growth by 0.2 p.p.

Expenditure cuts appear to have been the most painful element for the Slovak economy in the short term, stated the Financial Policy Institute (IFP) in its latest report in which it looked into the impact of the government’s consolidation packages in recent years.

Expenditure cuts appear to have been the most painful element for the Slovak economy in the short term, stated the Financial Policy Institute (IFP) in its latest report in which it looked into the impact of the government’s consolidation packages in recent years.

The least painful impact on economic growth has been an increase in indirect taxes, the TASR newswire quoted IFP on July 16.

Slovakia has seen three periods of fiscal consolidation - between 1993 and 1995, 2003 and 2005 and 2011 and 2013. IFP stated that despite significant consolidation efforts during the second of these periods, economic growth accelerated.

“This was due in particular to a positive situation in the world economy, Slovakia’s accession to the European Union, structural reforms, and also a low starting level for the economy,” said IFP. According to the Institute, the consolidation that began in 2011 reduced economic growth by between 1 and 1.8 percentage points.

As for the excessive deficit procedure, the government in 2009 pledged to reduce the deficit below 3 percent of GDP by 2013. “If no measures had been taken, last year’s deficit would have reached 4.9 percent of GDP. According to the latest estimates, consolidation measures amounting to €1.6 billion were required to achieve the final balance of 2.8 percent of GDP,” TASR quoted IFP.

The 2013 fiscal consolidation reduced GDP growth by less than 0.2 percentage points. The Institute also revealed that cuts in expenditures and labour costs appear to be less harmful for the economy when compared to the reduction in state investments.

“On the revenue side, an increase in taxes seems to have had a smaller negative impact on the economy than increases in levies,” said IFP.

The IFP’s mission is to provide reliable macroeconomic and fiscal analyses and forecasts for the Slovak government and public. It also serves as a policy arm of the Finance Ministry.

(Source: TASR)
Compiled by Zuzana Vilikovská from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

Top stories

The referendum is said to protect traditional families.
Politics & society

Turnout key to referendum result

EVEN amid heated discussion about the content of a February 7 referendum targeting the constitutional definition of family, experts say the biggest test for supporters of the Alliance for Family (AZR) ballot initiative is whether turnout surpasses the required 50-percent quorum of eligible voters.

26. Jan 2015
One of the drugs to be withdrawn from pharmacies.
Business

Eleven generic drugs withdrawn from Slovak pharmacies

Slovak State Institute for Drug Control (ŠÚKL) on January 28 suspended the distribution of 11 generic drugs and withdrew them from the market.

29. Jan 2015
Krásna Hôrka Castle ablaze.
Culture & lifestyle

Reconstruction on Krásna Hôrka Castle continues

THE RECONSTRUCTION works on the Krásna Hôrka Castle, which was severely damaged by fire in 2012, continue in accordance with the plans, Judita Krajčiová of the Slovak National Museum (SNM) told the TASR newswire.

27. Jan 2015
Tom Nicholson
Opinion

Economy Minister Pavlis has to go

No one with such an obvious conflict of interest has any place in government.

30. Jan 2015