RRZ Improves Deficit Estimate to 4.4% of GDP Due to Delayed Military Deliveries

Bratislava, 22 January (TASR) - The public administration budget deficit will reach 4.4 percent of gross domestic product (GDP) this year, which is €6.2 billion, the Budget Responsibility Council (RRZ) stated on its website on Thursday. The slight improvement compared to RRZ's original estimate of 4.6 percent of GDP is mainly due to postponed military equipment deliveries, which will, however, lead to higher spending in the coming years. If there is no further improvement in public finances in the years ahead, the deficit will rise again to 5.5 percent of GDP after 2026. Despite the drop, the deficit of 4.4 percent of GDP exceeded the government's budget target by 0.3 percent of GDP (€407 million). According to the council, the most significant risk to the budget is lower tax and levy revenues. The estimated shortfall could reach €588 million and is due to a less favourable economic outlook than the government expected. In order to meet the budgetary target of a deficit of 3.5 percent of GDP by the end of the electoral term, measures with an impact of 1.9 percent of GDP (€2.8 billion) need to be adopted. However, according to RRZ, further consolidation should hamper economic growth as little as possible, given the significantly weakened economy. The structure of the measures shouldn't weaken competitiveness or make investment less attractive. At the same time, it's important to make the best use of available EU funds, as Slovakia's Recovery and Resilience Facility ends in 2026. RRZ chairman Jan Toth stated, however, that the behaviour of governments and parliament poses a risk to the continuation of consolidation, as consolidation measures are not usually implemented in election years. "The three consolidation packages to date haven't led to an adequate reduction in the deficit, given the adoption of new expenditures, with some of the measures being only temporary and the overall structure of the packages being more anti-growth. External influences have also had a negative impact," pointed out Toth. However, with the economy growing slowly, he believes it is particularly desirable to consolidate public finances in such a way that they do not undermine the competitiveness of the economy. am/df