RRZ: Lack of Measures to Bring Deficit Down to 3% of GDP May Be Risk to Budget

Bratislava, October 11 (TASR) - The Budgetary Responsibility Council (RRZ) sees it as positive that the government is declaring a plan for the recovery of public finances, but it notes that the announced reduction of the deficit to 3 percent of GDP by 2027 lacks specified measures amounting to 0.4 percent of GDP in 2026 and up to 1.9 percent of GDP in 2027. "Such a proposed consolidation strategy may be risky from the perspective of the political cycle," said RRZ in its first opinion on the draft public administration budget for 2025-2027, which will be submitted by the Finance Ministry to a meeting of the Economic and Social Council on Monday. The council also announced that it will publish a detailed assessment of the draft budget before it is discussed in Parliament. RRZ pointed out that with the announced target deficit of 3 percent of GDP in three years, the public debt should still grow slightly to 60.5 percent of GDP. "According to RRZ estimates, partly due to lower future growth, a deficit of around 2.5 percent of GDP would be needed to stabilise the debt immediately," it said. As the measures in the approved consolidation package are ultimately more geared towards taxing economic activity, this may result in a reduction in the growth potential of the economy and thus lower budget revenues, it explained. According to the Finance Ministry, after the implementation of the consolidartion package, new expenditures will burden public finances to the tune of at least 0.3 percent of GDP. A further 0.3 percent of GDP will serve as a buffer against adverse developments. "In view of additionally necessary consolidation and possible risks to the overall yield of the package of measures, RRZ urges that the reserve should not be used for new expenditures," stated the council in its opinion. zel/df