Extraordinary valorization of pensions increases the deficit in 2023 (Budgetary Traffic Light May 2023)

  • 31. 5. 2023

Secretariat of the Council for Budget Responsibility (SoCBR) estimates the 2023 General Government Budget (GGB) deficit at 6.2 % of GDP

• SoCBR has significantly increased the estimated level of GGB deficit in 2023. Negative difference compared to the April forecast amounts to EUR 503 million. Under the assumption that the government does not take additional measures, the deficit can reach the amount of EUR 7 500 million (6.2 % of GDP). Month-to-month increase of GG deficit is caused mainly by the newly approved extraordinary valorization of pensions and parental allowance.

• Estimated deviation between the SoCBR’s forecast for the 2023 GGB balance and the approved budget is positive at 0.2 % of GDP, which means that the risk of the public deficit level rising above the government objective remains low.

• Compared to the government’s estimate published in the Stability Programme for years 2023 to 2026, the level of the deficit forecast by SoCBR is lower by 0.03 % of GDP.

• Expected expenditures of government measures to compensate high energy prices reach the level of EUR 2 964 million (2.5 % of GDP), of which expenses in the amount of EUR 495 million (0.4 % of GDP) should be financed from EU funds. After considering budgeted reserve, revenue from the windfall taxation of petroleum companies and electricity production companies is the overall budgetary impact of measures lower than budgeted level in the amount of EUR 1 134 million (0.9 % of GDP).

• Income from tax revenues and social contributions represents the most significant negative risk for the budget balance, the estimated shortfall reaches the level of EUR 629 million (0.6 % of GDP). Revenues are reduced by measures not included in the budget, in particular the reduction of the VAT rate for the restaurants and catering services and increase in the tax bonus.