Slovakia Set to Miss 2013 Budget Goal on Economy, Minister Says

Slovakia is set to miss its goal of cutting the budget gap to below the European Union’s limit this year as the slowing economy hurts tax receipts more than planned, Finance Minister Peter Kazimir said.

Tax revenue this year will probably be 347 million euros ($452 million), or 0.5 percent of gross domestic product, lower than projected four months ago, he said at a press conference in Bratislava, Slovakia, citing a revised ministry forecast. The budget shortfall is set to “closely” exceed the 3 percent-of-GDP ceiling, still allowing the country to exit the EU’s excessive-deficit procedure, he said.

“Three percent isn’t any magical number,” Kazimir said. “Our commitment is to exit the budget procedure. I still consider it achievable even with this forecast.”

Prime Minister Robert Fico wants to cut the budget deficit to 2.9 percent of GDP this year from 4.3 percent in 2012 to differentiate the country from its ailing peers in the euro region, which Slovakia joined in 2009. The European Commission in its May forecast projected the gap at 3 percent of GDP, while Moody’s Investors Service said June 11 it sees a “minor” overshoot of the target.

The change in the outlook for tax revenue reflects the ministry’s June 11 revision of its economic-growth forecast, which was cut by 0.7 percentage point to 0.5 percent. The slowing economy will weigh on receipts from the value-added and income taxes as persistent unemployment hurts consumer spending and profit outlook for companies worsens, Kazimir said.

In 2014, the tax shortfall will reach 0.8 percent of GDP and continue widening to 1.3 percent in 2016, according to the revised forecast.

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