Slovakia will require additional spending cuts and take additional measures to meet the budget deficit target as fading tax revenue has put the fiscal goals at risk, Finance Minister Peter Kazimir said.
Even as the economy is set to expand faster than previously estimated, the ministry expects to collect about 250 million euro ($307 million) less than planned in taxes this year, according to the revised projection released today. Without additional steps, the budget deficit for 2012 would reach 5.3 percent of gross domestic product, up from the targeted 4.6 percent of GDP, Kazimir said.
“The 2012 budget is now nothing more but a scrap of paper,” Kazimir told journalists in Bratislava, Slovakia. “The shortfall in tax revenue is an unpleasant surprise for us and I don’t see any other solution but imposing spending caps.”
The eastern euro-region member is striving to improve its public finances to protect itself from the region’s debt crisis, which has already prompted five nations to seek a bailout. Slovakia’s goal to trim the budget deficit next year below the European Union’s limit of 3 percent of GDP is “unquestionable” and the government will do anything needed to meet it, Kazimir said.
Premier Robert Fico, in power since April, seeks to balance the need for about 1.8 billion euros in saving and revenue boost by 2013 with his pre-election pledges to insulate most citizens from their impact. Among other measures, the government plans to raise the income tax for companies and best earners and has already introduced special levies for banks and selected industries.
The Finance Ministry expects the economy to grow 2.5 percent this year and 2.6 percent in 2013, which should make Slovakia one of the fastest-growing EU members.
Slovakia’s benchmark 2021 bond yielded 3.28 percent, or 1.94 percentage point more than German bunds with similar maturity, down from 4.76 percent at the beginning of the year. The country, rated A and A2 by Standard and Poor’s and Moody’s Investors Service, respectively, has already met its borrowing needs for this year.