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Published: 01/06/2023

Monthly Information, January 2023

According to provisional data, the state budget deficit amounted to EUR 1,394 million in 2022, which is significantly less than in 2021 (EUR 3,080 million), mainly due to lower COVID-related expenditure. In accordance with the Fiscal Council’s expectations, the deficit in 2022 was significantly lower than predicted in the revised budget. Upon the adoption of the latter, we estimated that expenditure could be lower by around EUR 500 million; it was actually lower by EUR 646 million. This confirms our assessment that inadequate budgetary planning continues, which also creates considerable manoeuvring room for unjustified spending in the previous and the current year.

Excluding the direct impact of COVID-related expenditure and measures to ease the cost of living crisis, the state budget was practically balanced in 2022 (a deficit of EUR 60 million). The budget adopted for 2023 foresees a considerable deterioration. The core balance is expected to amount to approximately EUR -1.5 billion, which is similar to 2020, although revenues are projected to be higher by around EUR 4.4 billion over the same period.

The expenditure for COVID-related measures amounted to EUR 864 million in 2022 and to a total of EUR 5,656 million since the beginning of the epidemic. A significant part of last year’s expenditure was on healthcare labour costs (EUR 144 million) which are largely not directly related to the epidemic and will continue to burden the state budget.

The impact of measures to ease the cost of living crisis on the state budget amounted to EUR 470 million in 2022, while all measures amounted to a total of EUR 740 million. With the adoption of further legislation in December, the estimated impact of which exceeds the relatively large reserve earmarked for this purpose in the 2023 budget, the measures taken to date to ease the cost of living crisis on the state budget are expected to amount to approximately EUR 1.6 billion this year.

The actual implementation in 2022 and the adopted budget for 2023 indicate that the growth of state budget expenditure excluding the direct impact of COVID-related expenditure and measures to ease the cost of living crisis is expected to be 18.5% this year. This would be about twice the average of the previous two years and the highest growth rate ever. The funds planned for social transfers and intermediate consumption, which according to the Fiscal Council’s assessment were actually underestimated at the time of adoption of the 2022 revised budget, are in our opinion insufficient to cover this year’s commitments. Given that the medium-term fiscal framework should play a central role in the proposed revised EU economic governance framework, significantly more efforts will be required to improve the credibility of budgetary planning.

Published: 12/06/2022

Fiscal Council consultation at the end of 2022

At the end of 2022, the Fiscal Council held a regular consultation with experts in public finance and economic policy. Participants to the meeting were Matej Avbelj, Anže Burger, Mitja Gaspari and Janez Šušteršič. On the initiative of the Fiscal Council, the discussion focused on proposed reform of the economic governance in the EU but also addressed the issue of current budgetary trends and long term challenges of fiscal policy.

Published: 12/05/2022

Monthly Information, December 2022

According to provisional data, the state budget deficit amounted to EUR 562 million in the first eleven months of 2022; without the direct impact of measures to mitigate the effects of the epidemic and inflation, the state budget would have had a surplus of EUR 298 million. The total deficit was almost EUR 2 billion less than in the same period last year, which is practically entirely the result of a smaller COVID-related expenditure. In accordance with the Fiscal Council’s expectations, the deficit will be significantly lower in the whole year than forecast by the revised budget (EUR 2,040 million).

Revenue excluding the direct impact of epidemic and inflation mitigation measures was 16.0% higher on a year-on-year basis in the first eleven months of 2022. The high growth is partly due to a base effect, as revenue was rather low in the first months last year due to restrictive measures and partly due to the rapid recovery of domestic demand, while higher inflation also contributed significantly to growth. At the same time, revenue from EU funds in particular has been lower than planned in the revised budget.

Expenditure excluding the direct impact of epidemic and inflation mitigation measures was 10.0% higher on a year-on-year basis in the first eleven months of 2022. A comparison between the actual budget outturn and the adopted revised budget shows that “core” expenditure (excluding that related to COVID and inflation) would total around EUR 2.3 billion in December, which is approximately EUR 1.3 billion more than the average for the first eleven months of this year. This is a continuation of the practice of taking advantage of the extraordinary circumstances, when unduly large manoeuvring spending room is created when preparing budget documents.

The total level of state budget expenditure for COVID-related measures from March 2020 to the end of September 2022 amounted to EUR 5,509 million, of which EUR 716 million in the first eleven months of 2022. The revised budget shows that a further EUR 371 million remains available for this purpose by the end of the year.

The direct financial impact of the measures taken thus far to mitigate the impact of price increases on the state budget this year is estimated at around EUR 430 million. Based on the adopted measures, another EUR 100 million should be realised in December this year. The Government announced a new package of measures for 2023 with an estimated amount of EUR 1.2 billion. If this estimate is realistic, then the entire reserve created for this purpose in the budget for next year would be used, which would limit the scope for adopting any additional measures.

A comparison of the outturn so far and the recently adopted revised state budget for 2022 indicates that a deficit of EUR 1,478 million is expected in the last month of this year, of which EUR 1,008 million is unrelated to measures to mitigate the effects of the epidemic and inflation. The budget outturn until November inclusive further confirms the Fiscal Council’s opinion that the adopted revised budget is unrealistic.

Published: 11/15/2022

Fiscal Council hosted the delegation of the International Monetary Fund

On 15 November 2022, Fiscal Council hosted a delegation of International Monetary Fund (IMF) within its regular annual visit to Slovenia.

The purpose of the visit was to exchange views on the current and expected fiscal position of Slovenia and the medium-term fiscal policy challenges, with discussion focusing primarily on the Fiscal Council’s assessments on the budgetary documents and recommendations on near and medium-term fiscal policy.

Published: 11/07/2022

Monthly Information, November 2022

According to provisional data, the state budget deficit amounted to EUR -283 million in the first ten months of 2022; without the direct impact of measures to mitigate the effects of the epidemic and inflation, the state budget would have had a surplus of EUR 465 million.

Revenue excluding the direct impact of epidemic and inflation mitigation measures was 18.2% higher on a year-on-year basis in the first ten months of 2022. The adopted revised state budget for 2022 therefore implies that the growth of this “core” revenue is expected to slow to 10.2% in the last two months of this year.

Expenditure excluding the direct impact of epidemic and inflation mitigation measures was 10.2% higher on a year-on-year basis in the first ten months of 2022. The adopted revised budget therefore implies that the growth of the “core” expenditure is expected to strengthen to 34.4% in the last two months of this year. This would mean that the “core” expenditure in the last two months of the year would average around EUR 1.7 billion per month, which is around EUR 0.8 billion more than on average in the first ten months.

The total level of state budget expenditure for COVID-19-related measures from March 2020 to the end of October 2022 amounted to EUR 5,465 million, EUR 672 million of that in the first ten months of 2022. According to the revised budget, COVID-19-related measures are expected to cost less than EUR 1.1 billion for the whole year, which means that another EUR 415 million would be spent by the end of the year.

The direct financial impact of the measures taken so far to mitigate the impact of the price increases on the state budget this year is estimated at EUR 440 million. The expected outturn in the last two months of the year is just under EUR 200 million. The total direct impact of all the inflation measures so far this year is estimated at around EUR 760 million.

The outturn so far and the adopted revised state budget for 2022 indicates that a deficit of EUR -1,757 million is expected in the last two months of the year, of which EUR -1,157 million is unrelated to measures to mitigate the effects of the epidemic and inflation. Against a backdrop of significant increases in investment, current transfers to social security funds and labour costs, transfers to individuals and households and expenditure on goods and services are even expected to drop year-on-year in the last two months of the year. The outturn up to and including October thus confirms the Fiscal Council’s assessment that the revised budget did not provide an adequate basis for the preparation of the 2023 and 2024 budget documents. Moreover, the creation of wide room for manoeuvre for expenditure also seemingly reduces the impact of measures taken after the entry into force of the revised budget on the fiscal outturn.

The draft Act on Healthcare Emergency Measures to Contain the Spread of the COVID-19 Communicable Disease and Mitigate its Consequences in the Health Sector continues the adoption of intervention legislation not necessarily directly linked to the situation it addresses. This suggests the risk that intervention legislation to mitigate the effects of inflation will also contain provisions that are not directly related to the energy crisis. The large budget reserve in the draft budget for 2023 for inflation measures would thus be used appropriately only formally, but in reality, as during the epidemic, the funds would be used to tackle other problems, including those of a systemic nature, which could put a lasting strain on public finances.

Published: 10/17/2022

Assessment by the Fiscal Council: Assessment of budgetary documents for 2023 and 2024

Under current circumstances, fiscal policy needs to maintain the flexibility to act fast and ensure effective measures to cushion the blow of the cost of living crisis but at the same time avoid creating additional inflationary pressures and putting at risk the sustainability of public debt in the medium term. The draft budgets have taken such orientations into account to some extent, but they come with a number of shortcomings and risks. We assess that the fiscal stimulus envisaged in the proposed budget documents, mainly in the form of a further increase in the already high level of investment, is neither necessary nor appropriate under the given circumstances and in view of expected economic trends. The assessment of projections in the submitted budget documents was made more difficult as their basis was set unrealistically in the 2022 revised budget. This increases the likelihood of higher-than-projected growth rates in 2023, particularly for government expenditure. In addition to the continued acceleration of investments, the rapid growth in expenditure is primarily due to discretionary measures taken after the entry into force of the applicable budget last autumn. These measures, coupled with a deteriorated starting position of public finances in 2022, the envisaged large-scale measures to tackle the cost of living crisis and the cooling of economic activity, contribute to the projected high deficit in 2023.

© Fiscal Council 2017 - 2023

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