The proposed revised budget for 2026 represents a further departure from the commitments set out in the medium-term plan, which would ensure the sustainability of public finances. Net expenditure growth will once again exceed the permitted limit and, despite relatively favourable economic conditions, the general government deficit is projected at around 3% of GDP. The proposed revised budget contains no measures to permanently improve the fiscal position. From the perspective of fiscal sustainability, it is crucial that such measures are included in budget documents for 2027 and 2028.
The revised budget primarily adjusts the budget to higher revenue and expenditure estimates and increases the projected budget deficit by approximately EUR 100 million. The increase in revenue compared to the budget adopted last year stems from more favourable tax bases, while the higher expenditure is primarily due to increased labour costs and purchases of military equipment. The RRF funds are also higher with the conclusion of this instrument. While we consider some of the revenue projections to be optimistic, there are also risks that certain expenditures will exceed the planned levels.
In autumn 2024, Slovenia adopted a Medium-Term Fiscal-Structural Plan for 2025–2028. By adopting this plan and in accordance with national and EU legislation, Slovenia committed itself to gradually improving its fiscal position based on the maximum allowed growth rates for net expenditure. According to the projections by the Fiscal Council and the Ministry of Finance, growth in this expenditure in 2026 is projected to be much higher (around 8%) than permitted (4.4%). The cumulative deviation from the projected increase up to and including 2026 stands at 1.2% of GDP, which is twice the permitted limit (0.6% of GDP). This also applies when taking into account the temporarily permitted exception due to increased defence spending.
The revised budget contains no measures to eliminate deviations from the Plan and thus increases the scope of future adjustment. Budget documents for 2027 and 2028 will need to clearly define and implement measures to permanently improve the fiscal position. The planned adjustments will also need to take into account the increase in defence spending, as the temporary exemption regarding its inclusion in the assessments of the appropriateness of fiscal policy expires in 2028. Without timely, sufficient, and reliable measures, there is an increased risk of initiating the EU’s excessive deficit procedure, and, particularly, the goal of achieving fiscal sustainability becomes harder to achieve.