The draft revised budget foresees a reduction in the overall state budget deficit from EUR 3.1 billion in 2021 to EUR 2.0 billion in 2022. The decrease compared to last year is due to high nominal GDP growth and consequently higher revenues, and a much less negative impact of one-off factors on the balance than last year, despite the adoption of inflation-mitigation measures. The Draft Revised Budget shows that the expected deficit in the last four months will be as high as EUR 1.7 billion, only partly as a result of measures to mitigate the effects of the epidemic and inflation. The draft revised budget implicitly foresees a considerable increase in spending at the end of the year, including spending unrelated to investment plans, which has no basis in the measures currently in force. Spending volumes, which exclude the impact of investment as well as one-off factors, are expected to increase by EUR 1.2 billion or 11.4% this year, which would be a record high. Such growth would be well above the medium-term sustainable growth path as defined by the currently estimated long-term potential output growth of around 4.5%.
We consider the draft revised budget to be unrealistic, as the deficit is likely to be smaller than projected, but this will set the basis for the autumn budget documents for 2023 and 2024 too high. Should the projections presented actually materialise, we consider the Draft Revised Budget to be risky from the point of view of spending rationality and, due to its expansionary trend, inappropriate in view of the current macroeconomic situation, which, according to the currently available data, remains favourable despite the uncertainties. At the same time, the implementation of the fiscal policy outlined in the Draft Revised Budget would also increase the risks of a prolonged persistence of high inflation and of a move away from the medium-term sustainability of public finances. These risks are exacerbated by the above-mentioned exceedance of spending growth in successive years, and point to structural pressures on public finances. The decision to prepare the revised budget separately from the revision of the budget documents for the coming two years also represents another departure from medium-term budgetary planning, which is the basis for the creation of a comprehensive and coherent fiscal policy. At the same time, the revised budget also does not fully take into account the updated macroeconomic forecasts, which, in a highly uncertain environment, further contributes to the unreliability of the presented fiscal plans.