www.fs-rs.si / News / News / Monthly Information, January 2024
Published: 01/09/2024

Monthly Information, January 2024

In 2023, the state budget deficit amounted to EUR –2,293 million, while excluding the direct impact of various intervention measures, the deficit would have been EUR -656 million.

State budget trends were worse last year than in 2022. The overall deficit was higher (by EUR 929 million), mainly as a result of the ‘core’ deficit (excluding intervention measures), which was higher by EUR 648 million. The total amount of intervention measures was higher by EUR 281 million. The deterioration compared with 2022 was largely due to higher growth in ‘core’ spending, in particular labour costs and transfers to social security funds, mainly to the Health Insurance Institute of Slovenia, and partly to lower revenue growth, in particular some key tax revenues with a slowdown in economic activity and inflation.

In accordance with the Fiscal Council’s expectations, the 2023 state budget’s outturn was nonetheless much less negative than the Ministry of Finance’s autumn estimate. The overall deficit was lower by EUR 828 million, mainly due to a lower realisation of ‘core’ spending (excluding intervention measures). When the budget documents for 2024 and 2025 were prepared last autumn, the Ministry of Finance’s estimate of the 2023 outturn was again significantly overestimated. This also led to an overestimated projection of the level of ‘core’ spending for 2024. To a certain extent, the latter is not based on the measures currently in place and allows for the adoption of additional discretionary measures with a lasting negative impact on the government’s fiscal position even within the limits set by the adopted budget. The adopted amendment to the 2024 budget based on the actual outturn for 2023 allows for a 5.8% growth of ‘core’ spending in 2024, compared to only a 1.0% growth in the previous estimated outturn.

The inadequacy of the budgetary planning is also indicated by the fact that the budget balances of the Ministry of Finance have not been adequately adjusted to the adopted 2024 budget or to the changes approved by the National Assembly during the budget adoption process with respect to the draft budget. The most significant changes relate to the solidarity levy for post-flood reconstruction included in the draft, which was cancelled during the budget adoption process, to the revised value of lump sum funding of municipalities +, and to the partial adjustment of transfers to individuals and households to inflation which was approved by the National Assembly and not included in the draft budget. These transfers are expected to fall by 10.2% this year according to the Ministry of Finance’s available budget balance and last year’s outturn, which is unrealistic. With inflation at 4.2% last year, they are likely to increase, which could lead to even higher growth in ‘core’ spending than currently indicated.

The decline in the government debt-to-GDP ratio is entirely due to high inflation, while its faster and more sustained decline is prevented by the high government deficit.

The risks to the medium-term sustainability of public finances have increased significantly since the outbreak of the epidemic. Over the 2020–2023 period, expenditure growth, excluding the impact of intervention measures to mitigate the effects of crises and expenditure on investment and interest, increased year by year and exceeded the estimated growth of medium-term economic potential throughout the whole period. In addition to the delay in introducing systemic changes, this is largely due to the adoption of numerous discretionary measures not related to crises which have a permanent negative impact on public finances.

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