In Slovakia balanced budget harder to accomplish than thought

It’s our responsibility to prepare a balanced state budget for 2020, but it will be more complicated than we thought six months or a year ago, PM Peter Pellegrini (leftist senior ruling party Smer-SD deputy chairperson) said, admitting that the estimated EUR500m set to be spent by the government in the form of social package measures will be a reason for concern for the finance minister. Pellegrini stated that the objective has to be preserved because the law on budgetary responsibility and the government programme declaration state so as well. He informed that he and FinMin Ladislav Kamenicky (Smer-SD) regularly analyse current developments in incomes, the growth forecast and other things that impact the budget. According to Pellegrini, an unbalanced budget may be the case. The important thing will be what turn the second half of 2019 will take and how the forecast for tax and levy incomes will look. Based on an official forecast, it will be possible to determine how much effort will be needed to go into achieving a balanced budget.

Recall that the fiscal responsibility council RRZ has identified significant risks when assessing the Stability Programme saying that the planned balanced budget would not be achieved without additional measures. According to the RRZ, the general government deficit may reach 0.9% of GDP in 2019, mainly due to excessive expenditure growth and overestimation of non-tax revenues, and then fall to 0.6% of GDP in 2020 and 0.4% of GDP in 2021 and 2022. Note also that NBS Governor Peter Kazimir (former FinMin) assessed that the path of Slovakia to the historically first balanced budget could become complicated with the central bank estimating that without the adoption of additional measures, this year’s budget may end up with a deficit of 0.7% of GDP instead of the planned zero. The central bank even projects the fiscal gap to widen to 0.8% of GDP in both 2020 and 2021.

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