Budget passed, deficit to fall

THE SLOVAK Parliament dominated by Prime Minister Robert Fico’s Smer party smoothly adopted the state budget for 2015 on December 4. The approved budget differs from that the Fico’s cabinet submitted to parliament in mid-October as results of new methodology to calculate general government finances enabled it to increase the budget deficit, even though it remains below this year’s 2.9 percent. Fico along with Finance Minister Peter Kažimír said the budget met social as well as fiscal principles, with the cabinet able to finance its priorities.

THE SLOVAK Parliament dominated by Prime Minister Robert Fico’s Smer party smoothly adopted the state budget for 2015 on December 4. The approved budget differs from that the Fico’s cabinet submitted to parliament in mid-October as results of new methodology to calculate general government finances enabled it to increase the budget deficit, even though it remains below this year’s 2.9 percent. Fico along with Finance Minister Peter Kažimír said the budget met social as well as fiscal principles, with the cabinet able to finance its priorities.

“Among them are employment and education,” Kažimír said at a press conference after the passage of the budget as cited by the TASR newswire. “We have found money for higher wages of teachers; for reduction of payroll taxes of low-wage employees. This is important for us in order to keep fire under the boiler and be able to enjoy record economic growths next year.”

Fico highlighted that the budget creates preconditions for further good results in 2015 and 2016. The year of 2015 will be the last full year of the Fico government as the next parliamentary elections are scheduled for 2016.

Revenues of the general state budget for 2015 are projected at €28.5 billion, expenditures at €30.4 billion leaving a deficit of €1.94 billion. This accounts for 2.49 percent of the gross domestic product including a 0.2 percent reserve while the original draft’s deficit was at 1.98 percent of GDP.

Earlier this year a revision of the general government debt and the deficit according to the
new ESA 2010 methodology reduced the general government debt for 2013, originally calculated at 55.4 percent, below the threshold of 55 percent of GDP to 54.94 percent, opening space for adjusting expenditures during budget discussions in parliament.

The approved budget of 2015 is based on forecasts that Slovakia’s economy would grow 2.4 percent next year, that the jobless rate would decrease to 13 percent and the employment will increase by 0.4 percent. The general government debt should remain below 55 percent of GDP.
The changes adopted during the parliamentary discussion include implementation of the so-called payroll tax’s deductable item, enabling low-wage workers to earn more, as well as an increase of wages of teachers and employees of the public administration and state service. The former will require €150 million to cover reduced health insurance contributions to be collected by health insurance companies.

The ministries of culture, health, environment and interior, among others, will receive more money than originally planned.

Geopolitical tensions remain the biggest risk for the state budget as is the failure to draw EU funds, Ivan Šramko, the head of the Council for Budgetary Responsibility said during a discussion programme on Tablet.tv. He praised the creation of a reserve fund of 0.2 percent of GDP that would be available to counteract unfavourable developments abroad.

“Geopolitical developments in the world also impact our budget,” said Šramko. “There is the conflict in Ukraine and one cannot assume how relations between the EU and Russia will develop. The development is not sure, thus we considered it necessary to recommend a reserve for unpredictable expenditures.”

Wasted opportunities

Non-partisan MP Jozef Kollár calls it “a budget of wasted opportunities”. According to him, the government is taking money from everyone while it is distributing it only to the chosen few. In this respect he said that by the revision to the income tax law, the Fico government would take €840 million from entrepreneurs during the next three years while the VAT, which remains at 20 percent even though it should have decreased to 19 percent, would draw an additional €730 million from the general public, TASR wrote.

The Christian Democratic Movement (KDH) joined the criticism. Miloš Moravčík, KDH vice-chairman, described the adoption of the budget as bad news.

“It will bring higher taxes, high prices in stores and an increase in indebtedness,” Moravčík said as cited by TASR. “The government is going to give people something, but it will take much more.”

According to him, the approved budget is the worst budget of the current government.

“All the taxes they have increased so far are being kept and new ones are being increased,” said Moravčík.

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