RRZ: This Year's Deficit Might Exceed Projections and Reach 4.9 percent of GDP

Bratislava, January 22 (TASR) - This year's general government deficit might be slightly higher than the 4.7 percent of GDP projected in the Parliament-approved state budget for 2025, according to the latest (January) projection released by the Budgetary Responsibility Council (RRZ) on Wednesday. RRZ estimates the deficit at 4.9 percent of GDP, or €6.75 billion. "The reason is a worsening of the economic outlook, which will be reflected in reduced tax and levy revenues, as well as the approval of higher expenditures on energy subsidies. The negative impact of the deterioration of the economic outlook on tax revenues can thus no longer be fully covered by the reduced reserve for macroeconomic risks," explained RRZ. RRZ in its current estimate took into account other measures that have been taken in the meantime, in particular subsidies for energy prices. Instead of the originally announced targeted aid amounting to €100 million, the approved across-the-board subsidies could cost almost €400 million, warns the council. The latest estimate is also based on an updated prognosis of a more negative macroeconomic developments. The council revised its estimate of GDP growth downwards from 2 percent in October to 1.8 percent. This estimate doesn't yet factor in impending risks for international trade following the change of administration in the United States. RRZ estimates higher-than-approved deficits in the next few years as well. Bigger deficits will also mean faster debt growth. "Without the adoption of additional measures (and without the continuation of the energy subsidy scheme), the deficit will reach 4.9 percent of GDP in 2026 and 5 percent of GDP in 2027. With such large deficits, the debt will continue to grow from this year's 59.2 percent of GDP to 65 percent of GDP in 2027," quantified RRZ. Additional consolidation worth 2 percent of GDP, or €3.1 billion, will therefore be necessary to meet the budget target by the end of the electoral term, which is a deficit of no higher than 3 percent of GDP. ko/df