Related News:
Slovakia Needs Additional Revenue to Close Deficit, Finance Minister Says
Slovak Finance Minister Ivan Miklos said spending cuts won’t be enough to meet budget deficit targets, requiring the new administration to seek almost 600 million euros ($781 million) in additional revenue next year.
The 2010 budget deficit may exceed 7 percent of gross domestic product, compared with a target of 5.5 percent, as tax revenue falls short of projections, Miklos said in an interview today. The administration of Prime Minister Iveta Radicova, who came to power three weeks ago, has limited room to cut the shortfall this year, so it will focus on 2011, he said.
Additional revenue and spending cuts in the 2011 budget should amount to 1.7 billion euros, which would reduce the fiscal deficit by about 2.5 percentage points of GDP, according to the administration’s plan for its four-year term, adopted two days ago. About one-third of that amount will come from revenue increases, Miklos said.
“It’s clear that we won’t be able to achieve” the target “solely by spending cuts,” Miklos, 50, said at his office in the Slovak capital, Bratislava. “We will need to look for a combination of spending cuts and revenue-boosting measures.”
Miklos declined to elaborate on how the government will increase revenue and cut spending, saying the measures will be discussed first by leaders of the four coalition parties. The aim of the government is to reduce waste in public spending and minimize the impact on citizens, he said.
‘More Savings’
The government’s agenda foresees no change in the 19 percent flat income tax rate for companies and individuals. Miklos said that any eventual changes to taxes won’t raise the overall tax burden for citizens.
“We want the state to make more savings,” Miklos said. “The price to be paid by the citizens should be as small as possible.”
Slovakia, which adopted the euro in January 2009, was hurt by the global economic crisis, which reduced exports and pushed unemployment to a five-year high. The budget deficit ballooned to 7.3 percent of GDP in 2009 from 2.2 percent a year earlier, and the economy shrank 4.7 percent.
The country will seek to reduce the shortfall to between 2.7 percent and 2.9 percent of GDP in 2013, Miklos said. The European Union has demanded that Slovakia cut the deficit to less than 3 percent by that year.
Faster Growth
Accelerating economic growth will help the eastern European country trim its fiscal deficit and reduce the debt-to-GDP ratio, Miklos said. Growth may reach 4 percent this year compared with the Finance Ministry’s June forecast of 3.2 percent, he said.
While the Slovak economy is set to have one of the fastest growth rates in the EU this year, the export-oriented recovery won’t create many new jobs, implying revenue will be 1 billion euros short of the plan in 2010, the Finance Ministry estimates.
A widening budget deficit this year would force the government to borrow more than originally planned, Miklos said. He doesn’t expect Slovakia, rated A1 by Moody’s Investors Service and A+ by Standard and Poor’s, to have any difficulty raising funds.
“It will depend on how the markets view the credibility of our agenda,” he said. “If the budget for next year will be credible, and I believe it will be, than financing shouldn’t be a problem.”
To contact the reporters on this story: Douglas Lytle in Prague at dlytle@bloomberg.net; Radoslav Tomek in Bratislava at rtomek@bloomberg.net.
Rate These Stories
Rate this Page