The Slovenia Times

Govt Deficit at 4.5% of GDP in First Nine Months


In the third quarter of the year alone, the general government deficit amounted to EUR 387m or 4% of GDP. It was higher than in the second quarter (EUR 368m or 3.8% of GDP), but lower than in the first quarter (EUR 499m or 5.8% of GDP).

National debt at the end of September amounted to EUR 28.933bn, or 78.1% of the country's GDP, according to the Statistics Office.

"The state of public finances in the first three quarters of the year was similar to last year's, with the difference being that there were no transactions for rescuing the banking system this year," said Andrej Flajs, who is in charge of national accounts at the Statistics Office.

No capital injections were provided to banks in the first nine months of the year, while EUR 445m or 1.7% of GDP was spent for this purpose in the same period last year, he noted.

However, Flajs highlighted that the deficit without expenditure for the financial crisis rose significantly in the third quarter of this year, when it stood at 4% of GDP, compared to 2.6% in the same quarter of 2013.

He said it was not clear whether this was a trend or a one-off situation. The primary deficit - which does not factor in any costs of the financial crisis or interest payments - was down to 1.3% of GDP in the first three quarters of this year, which is 0.8 percentage points less than last year.

Interest payments in the first nine months of 2014 amounted to EUR 892m, which is 3.2% of GDP, an increase of 0.8 percentage points on last year. "Fiscal policy has succeeded in neutralising this expenditure. However, as long as we have a primary deficit, we are still in financial crisis," Flajs said.

As a positive sign, Flajs highlighted that total state revenue rose by 2.4% in nominal terms in the first three quarters of the year. "This is extremely important. The recovery is resulting in high revenues, although we still face the problem of the nominal growth in interest expenditure".

Bank recapitalisation and other costs related to the financial crisis excluded, the general government deficit in the first three quarters of last year stood at EUR 1.246bn (4.6% of GDP), which is EUR 8m less than in the same period this year but a higher share of GDP due to the economic growth this year.

Flajs highlighted that despite some improvements, public finances were still not out of the woods.

A major risk is one-off financial transactions. "In the final quarter we will have several of these," he said in raising the bailout of Banka Celje and Abanka and the compensation scheme for ex-Yugoslav holders of savings accounts in the LB bank.

Moreover, he warned that the public purse could also eventually be burdened by the controlled winding down of Probanka and Factor banka, as around 80% of the EUR 430m loan given to the banks by Banka Slovenije still remained unpaid in the liquidation proceedings.


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