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Published: 02/05/2024

Monthly Information, February 2024

A key short-term risk to the sustainability of public finances is the renewed demands for public sector wage increases. It should be pointed out that measures taken in the past have maintained, on average, the real purchasing power of public employees at its pre-epidemic level, and large bonuses have been paid as part of the intervention measures. Given that the share of the general government wage bill in GDP is the sixth highest in the EU, we estimate that any increase in the wage bill without a systemic adjustment of wages and other parameters of the employment relationship and, in particular, without the simultaneous adoption of measures to increase the efficiency and accessibility of public services would only increase the risks to public finances (see more on pages 9–11). The latter have already increased since the beginning of the epidemic, due to the adoption of permanent discretionary measures unrelated to crisis mitigation.

According to preliminary data, the state budget recorded a surplus in January 2024 (EUR 333 million), which, excluding the direct impact of the intervention measures, amounted to EUR 351 million. In both comparisons, the surplus was slightly higher than in January last year.

The Health Insurance Institute of Slovenia ended 2023 with a deficit, despite increased growth in social contributions revenue and a substantial increase in the transfers from the state budget. The latter is becoming an increasingly important source of financing for the health insurance budget. Since 2017, it has increased by an average annual rate of almost 40%, and its share in GDP was almost 0.6% last year.

The real purchasing power of pensions has increased over the past four years, as growth in all types of pensions has outpaced cumulative inflation. With pension expenditure growth almost matching the increase in nominal GDP over this period, the share of pension expenditure remained the same last year as in 2019 (9.6% of GDP). The favourable labour market conditions allowed for a reduction in the total transfer from the state budget, which last year (1.8% of GDP) was the lowest since 1995. According to the Pension and Disability Insurance Institute of Slovenia’s financial plan for 2024, the transfer from the state budget is expected to increase to 2.1% of GDP this year, due to the high regular adjustment of pensions.

Municipal budget accounts recorded their largest ever surplus last year, thanks to the increase in the lump sum funding and, in particular, a large transfer from the state budget for post-flood recovery. In addition, expenditure growth slowed, mainly as a result of the stagnation of investment activity, which is linked to the electoral cycle at the local level.

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