Slovakia reduced its government deficit below 3 percent of gross domestic product (GDP) last year, according the spring deficit and debt notification of the European Union’s (EU’s) statistic office, Eurostat.
Slovakia’s overall government deficit last year reached 2.77 percent of GDP, compared with almost 4.5-percent deficit from the previous year. The government debt increased from 52.66 percent of GDP in 2012 to 55.42 percent last year. The gross public debt reached €39.975 billion last year, compared to €37.439 billion in 2012.
This has interesting implications Slovakia, according to the SITA newswire. Under the current legislation, the decline in the general government deficit below 3 percent of GDP should result in reducing the value-added tax (VAT) rate from the current 20 percent to 19 percent. The development of debt also shows that another threshold of the debt brake of 55 percent of GDP was exceeded last year. In line with the constitutional law on fiscal responsibility, the Finance Ministry is to freeze 3 percent of nominal expenses in public administration and bar expenditures incurred in the co-funding of EU-funded projects, the servicing of the state debt and transfers to the social security provider Sociálna Poisťovňa. The restrictions vis-a-vis next year's budget are under Slovakia's Act on Budgetary Responsibility, also known as the debt brake law.
Eurostat is still to confirm the data on deficit and debt in the autumn notification, SITA wrote.
Finance Minister Peter Kažimir praised the fact that Slovakia succeeded in squeezing its public finance deficit in 2013 to below 3 percent of the country’s GDP. “This figure is better than what we envisaged in the state budget for 2013... We’ve done better than we expected ourselves,” he told TASR newswire.
Cuts of €1.5 billion were needed to lower the deficit, noted the minister. Improvements in spending by municipalities also played a role, he added. Kažimír accentuated the need to continue to pursue consolidation efforts in 2015 as the ministry expects the deficit to drop to 2.49 percent next year. The ministry is also planning to adopt further measures such as removing some exemptions in the use of cash registers and introducing a withholding tax on income from sales of scrap metal. It also envisages better collection of VAT, while additional savings should be brought by the public administration-reform process known as ESO and cuts in the salaries of people working in public administration.
With Eurostat’s plans to introduce this autumn a stricter methodology on assessing budget deficits of EU-member countries, Slovakia’s deficit may be re-calculated - and raised, TASR wrote.
The government won’t be allowed to submit a budget for 2015 that would involve a rise in nominal expenses in public administration bar expenditures incurred in the co-funding of EU-funded projects and the servicing of the state debt, head of the Institute of Economic and Social Studies (INESS) Richard Ďurana said.
“Interestingly enough, Premier Robert Fico won't be able to provide funding from his reserve,” said Ďurana. He went on to recommend that the cabinet should cut non-priority expenses and “privatise wherever possible”.
According to Slovak Academy of Sciences (SAV) economist Vladimír Baláž, Slovakia remains among the countries in Europe with the lowest debt, but he added that, being a small economy, Slovakia can't afford even these levels of debt. A worse scenario would come about if the debt exceeded 57 percent of GDP, Baláž told TASR, as that would commit the government to table a balanced budget. He recommended that the government introduce system-wide reforms; particularly in the health-care sector.
(Source: SITA, 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.
24. Apr 2014 at 10:00