Slovenia's government budget expenditure is projected to reach a record €17.1 billion in each of next two years, with the deficit to amount to 2.6% of GDP in 2025 before falling to 1.6% of GDP in 2026.

The budget documents were passed by the National Assembly on 20 November, raising the expenditure planned in the 2025 original budget passed a year ago by 8%, mainly to cover the cost of rising wages as the public sector wage reforms starts to kick in.

Projected revenue in the revised budget is being raised by 4.6% compared to the original budget to €15.2 billion. It is expected to increase by 4.5% in 2026 to reach €15.9 billion.

Finance Minster Klemen Boštjančič announced the focus would remain on post-flood reconstruction along with measures to boost the economy, healthcare, knowledge, innovation, and housing and climate policies.

Apart from the pay reform, key outlays in 2025 are related to railway and road infrastructure, military equipment, rising interest payments and reserves, post-flood reconstruction, corporate subsidies, social security measures, municipal transfers, and pensions, according to the minister.

Along with these, additional resources are planned in 2026 for scholarships to address teacher shortages and the continuing rise in the cost of municipal funding.

Higher revenue is expected from a temporary increase in corporate income tax and a temporary tax on total assets of banks to fund reconstruction following the massive floods in August 2023.

In addition, the government expects higher receipts from excise duties and the levy on CO2 emissions, but also projects slightly lower receipts from EU funds.

In the parliamentary debate opposition MPs argued the revenue projections were too optimistic, while the expenditure should be more moderate, taking into account that the economy is cooling, industrial production is in decline and unemployment could rise.

The Fiscal Council finds that again expenditure is projected unrealistically high and entails the risk of further uneconomical spending.

The council's president Davorin Kračun also warned that the deficit could be even higher than planned, arguing that some of the planned legislative changes affecting the budget have not been factored in.

The budget implementation bill passed along with the budget brings more funds for local government, a higher annual allowance for pensioners, and full indexation of income tax brackets.

The law caps government borrowing at €4.6 billion in 2025 and €4.3 billion in 2026 with new state guarantees limited at one billion euros for each year.

Personal income tax brackets and reliefs will be adjusted next year for the 5.2% increase in average monthly pay between June 2023 and June 2024, which means a good €100 million more for the taxpayer.

The per capita funding of municipalities is being raised to €771 for next year and €775 the year after, with an additional €48 million secured in 2025 for the most underfunded municipalities.