NBS: Consolidation Measures to Help Sustainability and Stability of Finances

Bratislava, November 25 (TASR) - The package of consolidation measures, approved recently by Parliament, will contribute towards the sustainability of public finances and thus financial stability, and it's not expected to disrupt the ability of households and businesses to pay their loans in any significant way, it follows from the Report on Financial Stability, presented by representatives of the Slovak Central Bank (NBS) on Monday. "We perceive that package as rather positive in terms of financial stability. We've always warned that we need to pay attention to the health of public finances. As soon as we start down some unsustainable path, it would bear impacts not only on financial stability but also real economy," stated NBS Financial Stability Department director Marek Licak at a press conference. NBS was analysing whether the package would jeopardise the financial situation of households and businesses or undermine their ability to pay their loans. In case of the households, NBS assessed mostly the increase in VAT and cuts to tax bonus on children. "We analysed primarily households with loans and the impact on them is in essence minimal in terms of the ability to pay loans, hence we don't perceive the impact as pronounced," said Licak. In case of businesses, the corollaries will be slightly more extensive, due to the new tax on financial transactions and higher income tax. Businesses with loans record rentability of their own resources at about 11 percent and the package of measures is likely to cut their rentability by about 0.6 percentage points. "There is some impact, but nothing dramatic, at any rate. We don't expect this package to shake the financial position of households and businesses to such an extent as to render them unable to pay up their loans," said Licak. As for the banking sector, NBS expects its costs to rise. "Not only banks pay higher income taxes, but banks will also need to pay the tax on financial transactions, which spells additional costs. But again, if seen in the context of their relatively strong profitability, the impacts won't be significant," underlined Licak. The greatest uncertainty with respect to the consolidation package is posed by the new tax on financial transaction and the way businesses will react to it. "It is the uncertainty on how they change their behavior that might lead to additional risks. With respect to the banking sector this means mainly that there might be a potential ebbing of deposits. If such an optimalisation occurs that deposits are shifted abroad, it could influence adversely the liquidity of the banking sector and subsequently its profitability," warned Licak, adding that whether or not this becomes the case will be seen in 2025. mf