Monthly Information, September 2024

According to preliminary data, the state budget deficit in the first eight months of the year amounted to EUR 431 million, which is EUR 300 million lower than in the same period last year. The lower deficit is mainly the result of higher revenues, despite the strengthening of growth in “core” spending, but also of lower spending on intervention measures. The end-of-year deficit is estimated to be less than foreseen under the current budget, adopted in October last year (EUR 2,221 million).

Excluding the direct effect of the intervention measures, the deficit amounted to EUR 72 million and was almost the same as in the same period last year. Total expenditure on intervention measures amounted to EUR 370 million, around a quarter less than in the same period last year. This year, EUR 1,244 million is earmarked in the current budget for intervention measures. We estimate that the implementation of intervention measures will also be lower than foreseen.

The growth in “core” expenditure (excluding intervention measures) was 9.0% and slightly higher relative to the same period last year (8.2%), increasing the risks in the event of a reversal of the economic situation.

The direct impact of the proposed tax changes on public finances is expected to be modest. Based on the draft legal acts, the positive impact is expected to be around EUR 8 million. The possible implementation of an increase in excise duties on certain alcoholic beverages would double the impact.

At the end of September, the Government will prepare the draft state budgets for 2025 and 2026 and the first four-year fiscal-structural plan under the reformed EU governance system. It is not yet known whether it will be submitted to the Fiscal Council for assessment and presented to the National Assembly before being sent to the EC. This would increase the transparency and credibility of fiscal planning.

An ex post evaluation of forecasts of macroeconomic and fiscal aggregates in the reference period 2020 – 2023

The deviations of the macroeconomic and fiscal forecasts for the 2020–2023 period were larger than the long-term average. This is partly understandable, as this period was marked by large unexpected shocks. Although the 2020 intervention legislation provided for 2020 and 2021 to be excluded from the ex post analysis of forecast deviations, it is important that data from crisis periods are also included in the analyses, as they can have important implications for planning and public finances in the longer term. The ex post evaluation of forecasts of macroeconomic and fiscal aggregates excluding the impact of intervention measures also shows that deviations increased markedly on average over the last four years. This suggests the continuation of a lack of realism in fiscal planning. The increased deviations are particularly pronounced in the area of expenditure forecasts, which poses a risk of inefficient spending. At the same time, this approach to fiscal planning poses potential difficulties for target-setting in the context of reformed economic governance at the EU level, which will be centred on a multi-annual plan that cannot be revised. Its starting point should also be based on realistic forecasts of fiscal aggregates.

Monthly Information, July 2024

Both the general government and the public finance budgets are running deficits at the start of the year. This is the result of high growth in “core” expenditure, against a background of favourable revenue dynamics, mainly reflecting labour market conditions and also high nominal wage growth due to inflation. The end-of-year deficits, as estimated by the Fiscal Council and other domestic and international institutions, will be lower than in the current year’s budget documents in force, which were again marked in particular by excessive expenditure planning.

The transparency of public finances is worse than before the epidemic, making fiscal policy planning and monitoring more difficult. This is the result of a number of intervention measures and the lack of a systematic approach to long-standing challenges. The lack of transparency is particularly evident in transfers between public finance budgets, the building up of large reserves and the non-transparent operation of budget funds. Greater transparency is one of the key conditions for ensuring efficient public spending.

This year’s outturn so far confirms once again that budget planning is plagued by a number of shortcomings. These and the changed fiscal rules, which require more credible and medium-term-oriented planning, will require a more responsible approach to the preparation of the autumn budget documents.

Assessment by the Fiscal Council: Compliance of the general government budgets with the fiscal rules in 2023

The fiscal position improved last year; contrary to the Government’s plans, the fiscal policy was relatively restrictive. The reduction in the general government deficit below the Maastricht limit was made possible by the favourable macroeconomic situation, particularly in terms of public finance. Realised public spending was within the adopted three-year framework. Given that, when the framework was amended, the maximum permitted expenditure levels were set too high according to the Fiscal Council’s assessment, this was expected. A significant improvement in fiscal planning is also necessary due to the upcoming changes to the EU governance system. The numerous and considerable changes to the highest permitted expenditure that have been the practice thus far will no longer be possible in the future.

The Fiscal Council acquired a new modeling tool to improve the assessment of long-term sustainability of public finances

The Fiscal Council concluded a multi-year project with which we obtained a new model tool for assessing the long-term sustainability of public finances, with an emphasis on risks due to demographic changes. The project was financed by the European Commission within the Instrument of Technical Support to Member States (https://commission.europa.eu/funding-tenders/find-funding/eu-funding-programmes/technical-support-instrument/technical-support-instrument-tsi_sl ). The Danish DREAM Institute (https://dreamgroup.dk/), which has many years of experience in this field, was chosen to implement the model tool.

The project was officially completed with a workshop on 13 June 2024, where DREAM representatives presented a model to representatives of Slovenian institutions dealing with public finances (Ministry of Finance, Ministry of Labour, Family, Social Affairs and Equal Opportunities, IMAD, SORS, Bank of Slovenia, IER). Despite the official end of the project, DREAM representatives will continue to provide support to the Fiscal Council in managing the model in the future.

The new tool will improve the Fiscal Council’s ability to assess the long-term sustainability of public finances, particularly in the area of demographic change. The tool also allows simulation of the effects of different policy change scenarios.

Monthly Information, June 2024

According to preliminary data, the state budget, excluding the direct impact of intervention measures, recorded a surplus of EUR 210 million in the first five months of 2024, which was similar to the figure in the same period last year (EUR 237 million).

The growth of “core” revenue (excluding intervention measures) was higher on average in the first five months of 2024 (6.6%) than in the same period last year (0.3%). The growth of “core” expenditure was also higher, at 7.4% (6.4% in the same period last year).

The total volume of various intervention measures in the first five months of 2024 (EUR 240 million) was about half of that in the same period last year (EUR 459 million).