BRATISLAVA, December 30, (WEBNOVINY) — Analysts of the Financial Policy Institute of Slovakia’s Ministry of Finance assume based on a comparison of factors that according to political economy influence implementation of structural reforms that positive factors beneficial for Slovakia should prevail next year. “Many factors influence implementation of reforms. The following year should be rather positive from the viewpoint of structural reforms. Higher support of the public as well as influence of the economic and election cycle also have a positive affect,“ reads the institute’s report.
Support of the public is the first positive factor for implementation of reforms. The Eurobarometer survey conducted in Slovakia in 2010 shows that as much as 83 percent of respondents think that Slovakia needs reforms. In addition to that, the proportion of respondents sharing this opinion increased year-on-year when 78 percent of respondents were convinced about the need for reforms in 2009. The economic cycle is another positive factor that is favorable for reforms in 2011. The Organization for Economic Cooperation and Development (OECD) also confirmed the connection between the economic cycle and successful implementation of reforms, informed the institute. The OECD stated that the best time for reforms is two years after recession, which will be the year 2011 for Slovakia.
Influence of the election cycle is the third positive condition. “Successful reforms are mostly implemented during the first two years of the election cycle,” added the institute. The analysis also refers to one negative factor, namely consolidation of public finances, besides positive theoretic factors. “Consolidation of the state budget is a “reform” in itself, which creates fundamental prerequisites for Slovakia being able to settle its debts in the future. Based on experience of the countries that are members of the OECD, however, this reform can slow down structural reforms because fewer reforms were initiated in the period of fiscal consolidation in the past and they were less probable to be successfully implemented,” added the institute.
The Financial Policy Institute admits that reforms are usually painful for a short time and for a limited group of people. For example, citizens will feel increased tax rates in 2011, but it is harder for them to imagine the benefit of healthy public finances in a mid-term horizon. “In other words, positive effects of reforms are registered with a several-year delay and that is why it is not easy to implement them,” stated the institute. It also points out that structural reforms increase output potential of the economy and create space for higher economic growth and employment, which is ultimately translated in citizens’ higher living standard.
SITA
