Parliament passed the law of the year. Public finances will remain in deficit for next three years

Experts say a plan to consolidate public finances during years to come is missing.

Finance Minister Eduard Heger, left, and PM Igor Matovič after the parliament approved the state budget for 2021 and general government budget for 2021-2023. Finance Minister Eduard Heger, left, and PM Igor Matovič after the parliament approved the state budget for 2021 and general government budget for 2021-2023. (Source: TASR)

Parliament passed the state budget for 2021 as well the general government budget for 2021-2023. Ninety-one of the 141 lawmakers present voted for the legislation, while one refrained from voting and 49 MPs voted against it on December 8, the TASR newswire reported.

Slovakia’s general government deficit is projected at 7.41 percent of the country’s gross domestic product (GDP) or more than €7 billion next year, somewhat down from the 9.68 percent of GDP previously estimated for 2020. Public finance revenues are projected at €39.6 billion and expenditures at €46.7 billion. The country’s gross public debt should climb to 65 percent of GDP next year, i.e. above the Maastricht threshold of 60 percent of GDP. Last year it reached 48 percent. Slovakia plans to use an exemption from Brussels, which relaxes the rules for consolidating public finances.

Related articleNo balanced budget for next three years, this time due to COVID-19 Read more 

The current government does not expect a balanced budget in the coming three years. The deficit should gradually decrease to 6.18 percent of GDP in 2022 and a further 5.72 percent in 2023.

The goal is only to clearly move towards achieving a structurally balanced performance by 2024. If the general government deficit is to be reduced to zero in 2023, as stipulated by the existing law on the debt brake, consolidation measures worth €6 billion will be needed, noted the Finance Ministry, as cited by the SITA newswire.

Prime Minister Igor Matovič (OĽaNO) noted that the budget isn’t misleading, unlike previous years. Finance Minister Eduard Heger (OĽaNO) added that the expenditures in it aren’t undervalued, nor are the incomes overestimated as has happened in the past.

Heger admitted that the economy is facing a fall when budgetary revenues are expected to be €2.2 billion lower, but the budgets of some ministries will be increased despite this. He said that the winners of the budget are the social, healthcare and education areas. The minister stressed that €350 million more than this year will go to the social sector.

Meanwhile, the budget has a new format that emphasises value for money.

The strongest opposition party Smer criticised the increase in the gross public debt, which should gradually increase to 70 percent in 2023.

“This budget is a road to hell,” said Smer leader Robert Fico, as cited by SITA. “I do not envy the government that will take over after the current one.”

Lack of consolidation

The Council of Budget Responsibility (RRZ) sees zero consolidation for the post-crisis years, i.e. for 2022 and 2023, as the weakest point of the adopted general government budget. In 2021, the economy weakened by the pandemic will require support, and consolidation will not be desirable. The RRZ noted that the determination to consolidate in 2022 and 2023 should be all the stronger. However, the government did not specify consolidation in the budget for those years.

The council recommends preparing a concrete consolidation trajectory cumulatively of at least 1.5 percent of GDP, which would reduce the structural deficit to 3.6 percent of GDP by 2023.

Heger responded that consolidation would arrive, but later, admitting that the debt is high.

“The consolidation would be inevitable, but it is not necessary to speak about it now,” said Heger, as cited by SITA, adding that as the second wave of the pandemic would stretch even to 2021, it would be primarily necessary to watch the next development.

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