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IFP: Slovakia will not have to introduce budgetary ceilings

SLOVAKIA did not diverge much from its commitment to observe the rule of keeping a balanced budget in 2014, so the correction mechanism and expenditure ceilings will not have to be activated, states a report drawn up by the Finance Ministry’s Financial Policy Institute (IFP) released on July 2.

(Source: Sme)

A Eurostat report from the spring stated that Slovakia’s structural deficit in 2014 reached 2.9 percent of GDP.

“So, the structural balance, which is the primary indicator for evaluating a balanced budget, deviated by 0.3 percent of GDP from the current reference level of 2.6 percent of GDP,” stated IFP, as quoted by the TASR newswire.

National legislation states that the public finance deficit should be either balanced or post a surplus, which means that the structural deficit can be at 0.5 percent of GDP.

The analysts also focused on the expenditure rule, which they view as a supplementary indicator aimed at checking whether the pace of expenditure growth with regard to changes in income corresponds to potential economic growth. The report reveals that Slovakia's budgetary expenditures grew too quickly last year.

“When it comes to meeting the expenditure rule, a significant deviation amounting to 0.7 percent of GDP was recorded,” states the report, as quoted by TASR . The rules consider a change exceeding 0.5 percent to be a “significant deviation”.

Nevertheless, the IFP report also takes into account other circumstances that are not necessarily contained in Eurostat data. For example, IFP noticed an improvement in tax incomes, which, according to conservative estimates, should improve both the nominal and structural balances by 0.2 percent of GDP.  

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