Cabinet Plans to Cut Deficit to 0.5 percent in 2018

Finance Minister Peter Kazimir

Bratislava, April 26 (TASR) – The public-finance deficit is projected to stand at 0.5 percent of GDP next year, with the Government sticking to its plan for Slovakia to record its first ever balanced budget in 2019 and to maintain this in 2020, according to the Stability Programme that the Government approved on Wednesday.

Compared to the budget approved for 2017-19, however, the Finance Ministry has downgraded its plan somewhat, as it previously projected that the deficit should reach 0.44 percent of GDP next year. At any rate, the plan for 2019 has remained intact.

The Government’s budgetary goals are in line with both European and national fiscal rules, said the ministry. “At 0.93 percent of GDP, the consolidation effort last year significantly exceeded the requirements of the Stability and Growth Pact,” it added.

Meanwhile, the structural deficit is envisaged to reach 0.4 percent of GDP next year. Therefore, the Government is set to make good on its mid-term budgetary goal one year earlier than planned.

Last year saw the Slovak economy post some of its best figures ever. The public-finance deficit reached 1.68 percent of GDP, while economic growth equalled 3.3 percent.

The ministry is sticking to its plan for the deficit to reach 1.29 percent of GDP this year.

“It’s currently estimated that the public-administration deficit will reach 1.24 percent [this year],” said the ministry.

Meanwhile, the gross public debt is expected to continue to drop – all the way to 46 percent of GDP as of the end of 2020. “This will bring the debt outside the penalty thresholds applicable under the Budget Responsibility Act,” said the ministry. Last year, the debt stood at 51.94 percent of GDP.

Starting in 2018 the pace of reduction in debt-to-GDP ratio is set to accelerate significantly in view of forecasts for higher GDP growth and rising price levels, along with an expected primary surplus.

The Government’s fiscal policy will add moderately to economic growth. Slovakia’s public finances are also expected to fare better thanks to the ‘Value for Money’ project and improved tax collection.

On the other hand, foreseen developments aren’t free from risks. Most notably, these include unclear political prospects in Europe, the hard Brexit scenario and the onset of protectionism in global trade, said the ministry. The instability of Italy’s banking sector is yet another risk.

Conversely, fiscal expansion in the United States and an excessively early abandoning of the exchange-rate commitment by the Czech National Bank could have a positive effect. Overheating of the Slovak jobs market could drive salaries in the private sector up further, which could ultimately be reflected in more rapid increases in prices.