State's budget plans are on track

THOUGH the condition of public finances has been the trigger for some major migraines for governments around the world, Slovakia’s Ministry of Finance says that the development of Slovakia’s finances has been generally positive and that the ministry is not planning any additional measures in order to lower this year’s deficit to 4.9 percent of gross domestic product. Market watchers say the planned deficit is realistic if the government can keep spending under control.

Ivan Mikloš Ivan Mikloš (Source: TASR)

THOUGH the condition of public finances has been the trigger for some major migraines for governments around the world, Slovakia’s Ministry of Finance says that the development of Slovakia’s finances has been generally positive and that the ministry is not planning any additional measures in order to lower this year’s deficit to 4.9 percent of gross domestic product. Market watchers say the planned deficit is realistic if the government can keep spending under control.

“We see no reason to prepare additional measures,” said Slovakia’s Finance Minister Ivan Mikloš, as quoted by SITA newswire.

The Finance Ministry nevertheless admits that certain developments might pose some risks. The consolidation of the state-owned railway companies, clearing of the debts of Slovakia’s hospitals, or a shortfall from the sale of excess emission quotas might have a negative effect on the budget, according to Mikloš.

At the end of July 2011, the state deficit stood at €1.675 billion. Revenues had increased by 8.9 percent year-on-year to €6.569 billion as spending dipped by 2.4 percent to stand at €8.244 billion. The state budget deficit was 30 percent lower than in the same period last year, the Finance Ministry said in a release.

Finance Ministry spokesman Martin Jaroš said that “after seven months one can say that running the state cost the citizens significantly less than a year ago”. While over the first seven months of 2010, basic spending on state institutions reached €5.56 billion, in the same period this year the figure stood at €5.09 billion. Jaroš said this indicates a cheaper bill by 8.4 percent .

“So far we consider that the planned deficit in the state budget of €3.81 billion and subsequently the deficit of public finances at 4.9 percent of GDP are achievable,” Eva Sadovská, an analyst with the Poštová Banka, told The Slovak Spectator.

According to Sadovská, the ability of the government to keep public spending under control and at the same time keeping public procurement tidy will be decisive in containing the deficit.

The main driver of the Slovak economy this year is foreign demand, Sadovská said.

“If it [foreign demand] should weaken in the second half of the year, it could have negative impact not only on the economy but also the public finance deficit,” Sadovská said.

Mikloš said that employment developments have also been good as the rate of growth is increasing faster than predicted.

“Employment growth will make up for a drop in real salaries and we can affirm that there will be no drop in living standards in terms of real public consumption,” he stated, as quoted by the TASR.


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