Evaluation of the General Government Budget Proposal for 2015-2017 (November 2014)

In addition to the government-approved budget, which assumed the deficit at 1.98 % of GDP in 2015, two types of changes were introduced which increase the deficit to 2.49 % of GDP. The negative impact of the changes approved by the parliament represents 0.7 % of GDP, including the reserve for worse-than-expected macroeconomic development at 0.2 % of GDP. In addition, the deficit has increased particularly due to the introduction of a health insurance allowance (0.2 % of GDP), a wage rise in public administration (0.1 % of GDP) and increases under certain expenditure headings (0.1 % of GDP). The Ministry of Finance has updated certain assumptions for the development of revenues and expenditures with an overall positive impact of 0.2 % of GDP. These mainly reflect the anticipated additional expenditure reductions in the local government sector, the positive impact of wage increases in the public sector on revenues from taxes and social contributions, and the carryover of an extraordinary loan instalment from railway freight company (Cargo) from 2014 to 2015.

The CBR views negatively the transparency of the budget-approval process in the parliament. In spite of the fact that the government’s objectives are defined at the general government level in line with ESA2010 and the budget proposal is compiled for the period of next three years, the changes introduced by the parliament focus solely on the next year’s cash budget. In other words, the absence of additional information makes the evaluation of impacts for 2015-2017 under ESA2010 impossible. Since the full list of incorporated measures was not available even after the parliament had passed the budget, the CBR requested it from the Ministry of Finance. The list has enabled the CBR to evaluate the 2015 development and at least assess the impacts of these measures on subsequent years. The increase in tax revenues above the forecast by the Tax Revenue Forecasting Committee represents another negative feature of the budget.