BRATISLAVA, January 26, (WEBNOVINY) — The Slovak government could come close to a balanced budget already in 2013, provided that the new government that results from early elections will observe the consolidation pace of public finances from the previous year. “If the new government will be able to repeat the achievement of the current one, namely to improve the condition of public finances by 3.5 percent of GDP, Slovakia can have a deficit of only one percent of GDP as early as in 2013,” State Secretary at the Finance Ministry Vladimir Tvaroska (SDKU-DS) told Thursday’s news conference.
In spite of reducing the general government deficit last year, which was 4.6 percent of GDP based on preliminary data, the gap in public finances is still big, according to the Finance Ministry. Therefore, according to Finance Minister Ivan Miklos, regardless of the result of the early elections it will be necessary that the new government continues in improving the state of public finances. “It will be necessary that the new government after the elections, regardless of what it will be like, continues in this process and adopts measures for potentially even more significant reduction of this year’s deficit,” Miklos said. According to the approved budget, the general government should end this year with a deficit of 4.6 percent of GDP.
However, analysts do not expect a more significant improvement of the state of public finances, taking into account the early parliamentary elections. “Though I understand political limitations and influence of the political cycle on fiscal policy, I believe that this year will be a wasted chance from the viewpoint of fiscal consolidation, as probably there will be stagnation in the process of fiscal consolidation,” chief economist of UniCredit Bank Vladimir Zlacky told SITA news agency. He further said that consequently the pace of fiscal consolidation in 2013 will have to be faster as the deficit will have to go down under three percent of GDP, otherwise Slovakia will face sanctions from the European Commission.
Analyst with Postova Banka Eva Sadovska also thinks that years when elections take place are not typical for the most efficient management of public finances. “Though, to tell the truth, Slovakia is in a situation when it cannot afford high general government deficits and subsequently a growing public debt. And therefore as efficient as possible management with public finances should be one of the most important priorities for this and the following years,” Sadovska added.
According to analyst with Volksbank Vladimir Vano, deferring continuation of consolidation to the period following the elections would mean that the new government will have the task to compile a radically economical 2013 budget. However, taking also into account results from 2011, more significant consolidation in Slovakia is not entirely unrealistic. “Slovakia is still quite far from a balanced budget although 2011 is practical proof that determined consolidation though at the cost of operative suppressing of expenditures is not unrealistic in Slovakia,” Vano said.
SITA