Slovak Lawmakers Back Budget With Smallest Deficit in Nine Years

Slovakia’s parliament approved the 2016 budget, targeting the smallest deficit in nine years as accelerating economic growth helps Prime Minister Robert Fico finance increased social spending in an election year.

The 150-seat assembly, in which Fico’s Smer party has a majority, backed the proposed deficit limit of 1.9 percent of economic output with 80 votes on Friday. The target compares with a revised projection of a 2.7 percent shortfall this year.

“The budget proposal is a plan of prudent governance fully in line with European rules,” Finance Minister Peter Kazimir told parliament during the debate on the draft.

Fico, who oversaw Slovakia’s euro adoption as premier in 2009, is benefiting from economic growth that accelerated to an annual 3.6 percent in the third quarter. The European Commission and the country’s fiscal watchdog see a risk of a wider fiscal deficit.

The budget plan is based on an assumption of 3.1 percent economic growth driven mainly by domestic demand. The expansion will be even faster should Jaguar Land Rover Plc decide to build its new factory in Slovakia. The carmaker is holding exclusive talks with the government on the plan.

The government that will emerge from next year’s elections may need to take additional measures to meet the deficit goal, according to the Fiscal Responsibility Council.

The shortfall may reach as much as 2.7 percent of gross domestic product if risks materialize, the independent budget watchdog has said. The European Commission considers the budget plan to be in line with the bloc’s fiscal rules, but it said the targets “aren’t fully underpinned” by detailed policy measures.

Before it's here, it's on the Bloomberg Terminal.