At the 31st session of the Committee on Finance, held on 9 September 2025, the President of the Fiscal Council presented the Report on the Fiscal Council’s opeerations in 2024 and, on this occasion, also assessed the current fiscal position.
(31st session of the Committee on Finance, the first 12 minutes of the recording)
In the first eight months of this year, the state budget deficit, excluding intervention measures, was EUR 1.0 billion, whereas it was almost balanced in the same period last year. This deficit increase had been envisaged by the current budget. The projected deficit, excluding intervention measures, for the entire 2025 is EUR 1.9 billion, whereas last year, it stood at around EUR 0.2 billion.
This year’s budget deficit increase was exclusively the result of higher current expenditure. The increase in expenditure was broad-based and, as expected, it was mainly due to higher labour costs in light of the change in the pay system. At the same time, revenue growth stalled, which was partly due to the slowdown in economic activity and partly to a further decline in revenue from EU funds. This year, budget intervention measures have had a negligible impact on the overall state budget balance. Post-flood rehabilitation measures were predominantly funded with dedicated resources, while measures to mitigate the consequences of the epidemic and high cost of living expired last year.
The drafting of the 2026 and 2027 budgets is in its final stage. The Government must send the budget document proposals for assessment by the Fiscal Council and for adoption by the National Assembly by the end of September. Current data indicate that the realisation of expenditure for 2025 will again deviate from those envisaged by the current budget.
In the first half of the year, the state budget deficit, excluding intervention measures, was EUR 800 million, i.e. EUR 750 million more than in the same period last year. This deficit increase had been envisaged by the current budget. The deficit for the entire 2025 had been projected at EUR 1.700 million, whereas last year, it stood at around EUR 200 million.
Compared to the same period of the last year, slower revenue dynamics was a result of slower economic activity, which, at least for the time being, fell short of the projected one. The increase in spending remained relatively high and broad-based. As expected, it was mainly due to higher labour costs in light of the change in the wage system.
On the revenue side, the deviation of the realisation of spending from the current budget was mainly due to lower receipts from EU funds, which was on the expenditure side reflected primarily ina the lagging behind of investment spending.
The drafting of the budgets for the next two years, which is due to be made this autumn, should:
– be based on precautionary tax revenue planning and projecting realistic EU funding level due to the many uncertainties regarding macroeconomics trends;
– prevent overestimating expenditure, which, among other things, may result in ineffective expenditure, particularly in investment which should be planned in a reliable and medium-term oriented manner;
– address long-term fiscal risks and avoid increasing them. Adopting the pension reform would significantly mitigate those risks. Key decision-makers should abstain from adopting measures that appeal to voters during pre-election period, but have a negative medium-term fiscal impact. An additional key risk is envisaged in the increase in defence spending. This is why it is important to clearly define the purpose and the scope of this additional spending, and adopt measures to prevent a worsening of fiscal sustainability;
– maintain confidence of financial markets, since the margin on Slovenian Government bonds has been at its lowest rate in the past three years, while the country’s credit ratings have been among the highest in the region of Central and East Europe;
– ensure a general government debt reduction to achieve public finance sustainability.
What are expenditure reviews?
Expenditure reviews are in-depth analyses of public expenditure. Their purpose is to identify more efficient and cost-effective ways of delivering public services. The objective is not to achieve savings at the expense of the quality or accessibility of public services, but to ensure better value for money. Efficient use of public money is one of the key elements of fiscal sustainability.
Why are they important?
They assist states in planning their budgets more effectively, directing funds to where they are needed most, and enhancing the efficiency of the public sector. The majority of EU Member States already conduct expenditure reviews on a regular basis – often with strong political support and clearly defined accountability for the implementation of proposed measures.
What are the prerequisites for a successful expenditure review?
The key prerequisites are political will, clear accountability and a systematic approach. The objectives and outcomes must be clearly defined in advance and communicated publicly, even if they are not politically favourable. They should constitute a regular part of the budgetary process and be accompanied by an up-to-date overview of their planned contents.
Why does Slovenia need regular reviews of public expenditure?
Long-term pressures on public finances in Slovenia are becoming increasingly severe, ranging from population ageing and healthcare investments to the costs of the green transition and other public services. That is why it is crucial to use public funds efficiently.
Where is Slovenia falling behind?
In Slovenia, expenditure reviews are not conducted regularly, lack sufficient political support, and their findings are rarely applied in practice. Despite recommendations and guaranteed external support, the situation has not improved significantly in recent years.
What needs to be done?
Slovenia needs a systematic approach: expenditure reviews should become an integral part of the regular budgetary process, with clear and transparent objectives and results. It is vital that the findings are actually taken into account when making decisions about public spending.
The state budget had a deficit of -EUR 551 million in the first five months of the year, compared to a surplus in the same period last year. The balance thus deteriorated by EUR 765 million in one year.
Revenues were down year-on-year, while expenditure growth more than doubled compared to the same period last year.
The dynamics of all key revenue categories are slowing down. In order to meet the projections of the current budget, their growth should pick up significantly over the rest of the year.
The stronger expenditure growth is broad-based, mainly driven by higher labour costs with the introduction of the new wage system. The main underperformer of the current budget projections is investment spending, which is lower year-on-year, mainly due to lower EU funding.
The post-flood reconstruction is behind schedule, with only about one tenth of the planned funds disbursed for measures in the first five months of this year. At the end of May, the Fund for the Reconstruction of Slovenia had almost EUR 700 million at its disposal.
The Fiscal Council has been invited to attend the 42st extraordinary meeting of the Commission for Public Finance Control, held on 29 May 2025to discuss the agenda item: Decline in gross domestic product in Slovenia.