The budget documents foresee a decline in the fiscal deficit for 2027 and 2028, which is necessary to ensure debt sustainability. However, the measures by which this is to be achieved have not been duly presented. Both the Fiscal Council’s and the Government’s no-policy-change scenarios indicate that the deficit will continue to increase. The aggregate net expenditure growth, which serves as the benchmark for the assessment of fiscal rules, is projected to exceed the commitment set out in the medium-term fiscal plan. The budget documents also fail to account for the potential negative impact of the planned expenditure constraints on economic activity. The Government should prepare a more credible budget proposal and a medium-term fiscal framework, incorporating clearly defined measures to ensure fiscal sustainability and support the strengthening of long-term economic potential.
The Fiscal Council was invited to the 8th emergency session of the Committee on Finance, held on 21 October 2026, under the agenda item entitled: Draft budget of the Republic of Slovenia for 2028.
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.
The Fiscal Council was invited to attend the 3rd session of the Commission for Public Finance Control of the National Assembly of the Republic of Slovenia, held on 15 September 2026, to discuss the agenda item: Impact of the Act Determining Intervention Measures for the Development of Slovenia on state budget and other public finance budgets.
The implementation of the Intervention Measures for Slovenia’s Development Act would probably stimulate higher economic growth. However, in none of the simulations conducted would the resulting feedback effects on public finances – even after ten years – fully offset the estimated direct deterioration of the fiscal balance. The Fiscal Council does not evaluate the appropriateness or other objectives of the measures, but solely their potential impact on public finances.
The direct deterioration of the fiscal balance in 2027 could amount to around EUR 1.2 billion, or approximately 1.5% of the projected GDP. This amount does not represent a permanent annual cost, as it also includes temporary measures.
The feedback effects of increased economic activity would, on average, offset about one-quarter of the direct deterioration in the fiscal balance in the short term and about half over a ten-year period. Smaller long-term deficit increase in some model simulations is not merely the result of favourable feedback effects of economic activity, but also of additional fiscal policy adjustments including expenditure reductions.
Estimates of the size of effects are subject to uncertainty. Due to the unavailability of individual-level data, the static estimate is based on publicly available sources and numerous assumptions, while the dynamic estimates also depend on assumptions regarding the response of the economy. Results show the potential consequences of implementing the ZIURS compared to a scenario without measures, rather than forecasting the actual level of the deficit and debt.
The state budget deficit amounted to EUR 1.2 billion in the first eight months of this year. Revenue and expenditure growth stood at around 11%. Revenue growth strengthened considerably compared with the same period last year, even when excluding the effect of the accelerated absorption of funds under the Recovery and Resilience Plan (RRP). This strengthening was primarily driven by higher tax revenues, particularly VAT, which also reflects improved macroeconomic conditions. Expenditure growth remains high and broad-based. The main driver of growth continues to be higher labour costs, which are likely to be considerably higher for the full year than projected in the budget adopted last year.
Under the current budget, the deficit is expected to amount to EUR 2.1 billion this year. The presentation of the budget revision was postponed compared with the original timetable. Based on information publicly available to date, expenditure is expected to be around EUR 750 million higher, of which approximately EUR 300 million is attributable to RRP funds, which have no impact on the balance. Based on expenditure and revenue execution to date, we estimate that tax revenues will also be higher than currently planned. An assessment of this year’s deficit will be possible following the full presentation of the budget revision and any measures to stabilise public finances.