Evaluation of Medium-term Budgetary Objectives for 2015-2017

  • 15. 5. 2014

The government has published its budgetary objectives for the years to come. Apart from being important from the domestic fiscal perspective, these objectives are subject to EU-wide evaluation under the European Semester.

The government’s fiscal strategy is also important in the light of the effort to close the excessive deficit procedure to which Slovakia has been subject since 2009. The essential precondition has been to reduce the 2013 deficit below 3 % of GDP and keep it under this level also in 2014 and 2015 based on the Commission’s forecast. In 2013 the deficit reached 2.8 % of GDP and the latest Commission forecast assumes it could remain under 3 % of GDP also in 2014 and 2015. Based on these figures, the excessive deficit procedure in respect of Slovakia is expected to be lifted. The Council for Budget Responsibility evaluates the meeting of the medium-term objectives presented in the 2015-2017 Stability Programme from two perspectives. The first is to monitor and evaluate, pursuant to the Fiscal Responsibility Act, the development of public finances, with particular emphasis on identifying potential risks, and the second is to assess compliance with the Fiscal Compact, which has been transposed into the national legislation and which defines the pace of consolidation towards the medium-term objective.

The Council views positively the fact that the government declares its intention to continue public finance consolidation at a pace necessary to ensure permanent deficit reduction after 2013 and put in place conditions for the abrogation of the excessive deficit procedure. Moreover, general government debt is expected to stabilise below 57 % of GDP and attain the medium-term objective (MTO) by 2017. The meeting of these objectives will significantly improve the long-term sustainability of public finances in Slovakia. On the other hand, a point needs to me made that, as of yet, these plans are not supported in their entirety by concrete measures a large number of which must be further specified. After the robust consolidation in 2013, the government is not planning to use the year 2014 to make permanent improvements in the general government balance; hence the meeting of the MTO by 2017 will require an annual consolidation effort of the government of 1.2 % of GDP between 2015 and 2017. The transgression of the third debt limit at 55 % of GDP in 2013 has triggered a set of sanction mechanisms which, among other things, entail a freeze on expenditures for 2015 at the level of the 2014 approved budget.