In its latest monthly report, the Fiscal Council warns of an increase in the budget deficit, driven by current expenditure and a decline in budget revenues.
“This year’s increase in the deficit is exclusively due to higher current expenditure. Its growth is broad-based, in line with expectations, with higher labour costs due to changes in the salary system contributing most to it. At the same time, revenue growth has stalled, partly due to the slowdown in economic activity and partly due to a further decline in revenue from European funds,” the Fiscal Council wrote in its latest monthly report.
Since the beginning of the year, the state budget has recorded a deficit of 1.031 billion euros, compared to 62 million euros in the same period last year. The government of Robert Golob plans to increase the deficit to 1.85 billion euros by the end of the year. By comparison, last year’s deficit was around 200 million euros.
The disastrous drawdown of European funds continues
In its report, the Fiscal Council also warns of reduced budget revenues. The economy is creeping closer to recession, while the disastrous drawdown of European funds continues. Here is what the Fiscal Council stated in this regard: “Based on budget projections for the entire year, actual performance is lagging behind both in terms of revenue and expenditure. The main reason for this, on the revenue side, is the slowdown in economic activity and, above all, the lower-than-expected drawdown of European funds, which is reflected on the expenditure side in a significant lag in investment spending.”
The Fiscal Council explains that the key reasons for the weaker revenue dynamics are lower revenues from corporate income tax. “The year-on-year decline is mainly due to the high base, as last year’s adjustment was among the highest since records began. Monthly advance payments this year are similar to last year’s,” they write. As already mentioned, the acquisition of European funds is also problematic, as they were a fifth lower on an annual basis due to the slow drawdown of funds from the 2021-2027 financial perspective.
Unrealistic budget planning
The Fiscal Council warns that budget planning should be cautious and should therefore allow room for responding to a deterioration in the economic situation. “In times of economic uncertainty and major long-term challenges, realistic and prudent budget planning is also essential to ensure transparent and effective management of public funds,” they emphasise.
Ž. K.
