A record deficit is expected at the end of the year, not only due to COVID-19

Expenditures unrelated to the pandemic will account for more than one-third of the 2020 general government deficit.

The Peter Pellegrini cabinet did not include 13th pensions in the general government budget for 2020.The Peter Pellegrini cabinet did not include 13th pensions in the general government budget for 2020. (Source: Sme - Marko Erd)

Slovakia will end this year with a record general government deficit of 8.4 percent of gross domestic product (GDP), up from the originally projected 0.5 percent. Finance Minister Eduard Heger (OĽaNO) points out that more than a third of this deficit is unrelated to the impacts of the novel coronavirus pandemic.

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“The budget, approved by the previous parliament with a 0.5 percent deficit, was an illusion,” said Heger.

Moreover, the Defence Ministry's budget was underrated by €289 million, while the performance of local governments should worsen by €189 million. Another shortfall, which is not related to the fight against the pandemic, is adjusted EU funds corrections worth €180 million. The ministry corrected the budgeted revenues from e-cash registers and nano markers by the same amount. By comparison, the sum of these non-pandemic items is not much lower than, for example, the estimated revenue shortfall from the so-far unprecedented expected economic downturn, which is estimated at less than €2.4 billion.

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Higher than projected in 2019, too

Slovakia’s general government budget ended last year with the largest deviation from its original target since 2010. While the approved budget foresaw a balanced performance for 2019, the actual result was a deficit of 1.3 percent of GDP. The Budget Responsibility Council (RRZ) stated this in its report on the performance of the general government budget in 2019. The materialisation of risks, to which the council had pointed out and to which the government did not respond sufficiently, contributed to the worsening of the deficit.

The budget already contained significant risks at the time of its approval. Most of them were identified by the council in previous years and were regularly materialised.

“The risks were not compensated during the year by unexpected positive effects, which only highlights the need to draw up a budget based on realistic assumptions,” said Ivan Šramko, head of the Budget Responsibility Council, as cited by the SITA newswire.

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