BRATISLAVA, January 28, (WEBNOVINY) – Slovakia’s fiscal consolidation plan aims at the strongest deficit reduction this year in the CEE region. This results from a comparison of the development in ten EU countries elaborated by UniCredit Bank analysts. Apart from Estonia with general government deficit deeply below 3 percent of the GDP, all assessed countries aspire to cut back the deficit. The highest planned consolidation rate in 2011 is projected in Slovakia, presently estimated at 2.9 percent of the GDP, says UniCredit senior economist Vladimir Zlacky. Slovakia is followed by Latvia, Romania and Lithuania, which reported high deficit in 2010, likewise Slovakia. On the other hand, analysts found the most lukewarm ambitions regarding fiscal consolidation in Slovenia, the Czech Republic and Hungary.
Analysts point out that the relatively steep consolidation pace in a short-term horizon will mildly slow down the Slovak economy because the austerity package will reduce the purchasing power. Stabilization of the general government finance will have a positive influence on the country’s risk profile and the amount of interest rates paid by the state for debt service coverage. Money saved thanks to lower interest cost can be used to decrease taxes and payroll levies or for infrastructure and education investments, suggests Zlacky.
Fiscal consolidation is a necessary stabilization measure after two-year unsustainable development of public finance. As a rule, healthy general government finance and low debt are the preconditions for a long-lasting economic prosperity, Zlacky added.
Representatives of the Slovak Finance Ministry have confirmed the government’s goal to lower the general government deficit from last year’s nearly 8 percent of GDP to 4.9 percent of GDP. The ministry is presently working on a second series of stabilization measures to squeeze the deficit below 3 percent of GDP (the Maastricht Criterion) by 2013. The ministry expects it will unveil the concrete measures in April.
SITA
