The Slovenia Times

Flood expenditure balloons budget spending

Finance Minister Klemen Boštjančič. Photo: Boštjan Podlogar/STA

The state budgets for the next two years were supposed to implement gradual fiscal consolidation after a long period of heavy spending, first during covid and then due to the energy crisis, but floods in August have upended plans.

"The macroeconomic situation remains uncertain," Finance Minister Klemen Boštjančič said as he presented the draft budget documents on 28 September.

The full damage assessment after the August floods is not yet known, but preliminary estimates suggest that billions of euros will be needed to repair the damage, which means significant amounts of money will need to be rearranged within the budget, he said.

In 2024, €14 billion in revenue is expected, while expenditure is to reach €16.2, a billion more than originally planned. The budget deficit is projected to hit 3.3% of GDP.

The draft national budget for 2025, meanwhile, envisages revenues of €14.6 billion and €15.8 billion in expenditure with the deficit at 1.8% of GDP.

The general government deficit, a broader measure, will amount to 3.8% of GDP in 2024 due to the floods instead of the initially expected 2.8%.

EU fiscal rules dictate that the general government deficit should be below 3% of GDP. They have been suspended due to consecutive crises but will be back in force next year.

Boštjančič explained that in the event of natural disasters when the damage exceeds a certain percentage of GDP a country can decide for these exceptional expenditures not to be included in calculations assessing the soundness of public finances.

The European Commission checks very carefully whether these expenditures are really only those related to the natural disaster. "The deficit unrelated to flooding remains unchanged", the minister said.

So far, €600 million in budget funds has been spent on flood relief this year and another €1.1 billion is expected to be needed in 2024.

Boštjančič added that transfers to individuals and households would not be adjusted for inflation in 2024. Pensions will however increase.

The new budgeting plan comes after all budget uses were asked to cut their spending by 4%. Boštjančič said the majority had done that, but cuts were not implemented in science, research and development, and subsidies for business.

"These are the most important resources for increasing our inflows in the long term through achieving higher added value," he said.

The budget plans will now be sent to parliament.


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