As regards meeting the objectives under the Fiscal Responsibility Act, the government’s budget proposal fails to sufficiently capitalise on the favourable economic conditions to accelerate consolidation.
The weak binding nature of the medium-term budgetary framework has allowed the government to submit a budget proposal that worsens the budget balance targets again and necessitates the adoption of additional measures to meet the medium-term budgetary objective in 2020. The budgetary objectives are threatened by risks amounting to 0.6 to 0.8 % of GDP a year and, in case these risks materialise while taking into account the current macroeconomic assumptions, a balanced budget can only be attained within the timeframe of the budget if more profound consolidation measures are adopted.
The CBR estimates that, having considered the risks of the budget proposal, the debt would decline to 47.5 % of GDP at the end of 2020, thus staying within the first sanction zone. The expected worsening of the deficit in 2017 and negative impacts of measures in the pension system are slightly deteriorating the long-term sustainability of public finances. In order to preserve the long-term sustainability of public finances, it is inevitable to meet the objectives declared by the government which are aimed at achieving a balanced budget by 2020. Transparency has improved with the provision of more detailed information in those areas where expenditures were subjected to review under the Value for Money project. In terms of comprehensively communicating the individual measures and the manner in which the budgetary objectives are to be achieved, the budget proposal is considered as less transparent.