BUSINESS IN SHORT

Budget cuts dragged on growth last year

CONSOLIDATION measures adopted in recent years have negatively affected the Slovak economy, but growth was not significantly reduced, according to the latest report of the Financial Policy Institute (IFP), published on July 15.

CONSOLIDATION measures adopted in recent years have negatively affected the Slovak economy, but growth was not significantly reduced, according to the latest report of the Financial Policy Institute (IFP), published on July 15.

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,” the TASR newswire quoted IFP. “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.”

To reach a deficit of 2.8 percent of GDP, the government introduced measures amounting to 2.2 percent of GDP, €1.6 billion in 2013. However, just a small part of the measures, specifically 0.7 percent of GDP, directly affected GDP, and therefore fiscal consolidation decreased economic growth by less than 0.2 p.p. in 2013.

Slovakia has seen three periods of fiscal consolidation - between 1993 and 1995, 2003 and 2005, and 2011 and 2013. The 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 the IFP. According to the Institute, the consolidation that began in 2011 reduced economic growth by between 1 and 1.8 percentage points.

The results of the IFP analysis indicate that consolidation in terms of expenses affects the growth of the economy more than consolidation related to incomes over a one-year period. In the intermediate or long term, however, spending measures slow the economy down less than revenues.

Top stories

Slovak Levies in their beginnings in 2012
Politics & society

Slovak extremists groups can produce rebels in Ukraine

THERE are several unofficial paramilitary groups running military trainings with non-lethal guns in Slovak forests and Martin Keprta, who used to take part in such exercises, now fights for pro-Russian separatists in Ukraine.

26. Feb 2015
Mochovce
Business

Finnish firm eyes Slovenské Elektrárne shares

FINNISH firm Fortum looks interested in acquiring a 66-percent stake in Slovenské Elektrárne (SE), the country's largest electricity producer. 

26. Feb 2015
Ján Figeľ
Opinion

KDH at 25? More a funeral than a celebration

Christian Democrats never found a way to wed pragmatism with inspiration. 

27. Feb 2015
Organ player János Pálúr
Culture & lifestyle

Countrywide events

Tips for cultural, sport and social events between February 27 and March 8

25. Feb 2015