The Slovenia Times

Fiscal Council cautions against politically-motivated spending ahead of election


Ljubljana, 23 September - As the government prepares to send budget documents for the next two years to parliament, the Fiscal Council has warned that the continued existence of exceptional circumstances "should not be used to adopt measures that reflect the final stage of the political cycle". Slovenia is due to hold a regular election next year.

"The existence of extraordinary circumstances in 2022 merely allows a flexibility of fiscal policy to directly address the challenges related to the epidemic, while additional stimulus measures based on the latest projections by the Institute of Macroeconomic Analysis and Development are not justified," the council said, referring to the substantially upgraded GDP growth forecast.

The body noted that in recommending the continued existence of exceptional circumstances at the EU level next year the European Commission called for a differentiation of fiscal policies between member states in reflection of the level of recovery attained and various risks for the mid- and long-term fiscal sustainability of an individual country.

"The Fiscal Council believes that fiscal policy's excessive support of economic growth with substantial deficits could in the coming years lead to the creation of macroeconomic imbalances, increase the scope for ineffective spending of public funds, narrow the scope for creating a manoeuvring ground to act in difficult times and make it harder to move to the corrective mechanism procedure."

The council believes suitable stimulus for economic growth should come from the available EU grants.

Despite the improvement in the economic situation and the favourable economic outlook, the council pointed to risks, in particular those related to the future course of the epidemic.

It also pointed to recovery in the labour market and signs of limitations on the supply side.

In assessing the autumn budget documents, the council plans to focus on projections of current expenditure, the growth of which the European Commission says should be limited in particular in countries with higher levels of public debt.

"This also applies to Slovenia where the gross general government debt increased at above EU average rate during the crisis," said the council.

The government adopted an amendment to the budgeting decree yesterday which raises the expenditure ceiling by EUR 670 million to EUR 14.99 billion to accommodate higher outlays for the fight against the coronavirus epidemic.

However, faster-than-expected economic growth had led to significantly higher budget receipts and the budget deficit is projected to stand at 7.9% of GDP at the end of the year compared to 8.6% of GDP planned in the existing budget law.

The general government spending ceiling will increase by EUR 500 million to EUR 25.8 billion, and the general government deficit is projected to stand at 7.5% of GDP.


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