BRATISLAVA, September 7, (WEBNOVINY) — The aim of the new Slovak government to squeeze the deficit of public funds to below three percent of gross domestic product in 2013 is realistic with regard to the planned consolidation measures, according to economic analysts. The development of the economy in the future is, however open, and additional tightening of belts might be required. Analyst for UniCredit Bank Slovakia David Derenik commented for SITA news agency that the proposed changes, assisted by a growing economy could reverse the tendency of the present deficit and slowly meet the plans for coming years. Nonetheless, tightening of belts across Europe could result in a slower growth of Slovak economy and the proposed changes would thus not be last, he added.
Analyst for the Slovenska Sporitelna bank Michal Musak opines that the fact that the government approved a majority of consolidation measures at the beginning of the election term increases the chances of meeting the consolidation efforts. If the plans to cut the deficit were adopted later, it would be harder to fulfill the goal. Economists add that the effort to reduce the deficit does not end with approving austerity measures. “The volume of the deficit is above all in the hands of the government and the parliament. While revenues cannot be raised at will, expenditures can always be reduced,” stated Radovan Durana of the INESS institute. Eduard Hagara of ING Bank added that with regard to sustainability of public funds, it would be best if the proposed austerity measures concentrated on the side of expenditures.
Consolidation effort of Slovakia’s center-right government should result in a reduction of the general government deficit to 4.9 percent of gross domestic product (GDP) next year. The deficit should go down to 3.9 percent of the GDP in 2012 and find itself below 3 percent of GDP as defined within the Maastricht Criteria in 2013. Next year’s consolidation in the volume of EUR 1.7 billion from this year’s gap of 7.8 percent of GDP should be achieved by cutting expenditures, as well as increasing the budgetary revenues. The value-added tax rate will be raised from nineteen to twenty percent. Also, various tax and mandatory insurance contributions exemptions are to be canceled. On the side of expenditures, the government plans to cut current expenditures of individual chapters in the state budget by ten percent.
SITA