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Published: 03/03/2023

Monthly Information, March 2023

In the first two months of this year, the state budget had a surplus of EUR 108 million. Excluding the direct impact of expenditure on anti-COVID measures (EUR 41 million) and anti-inflationary measures (EUR 94 million), the surplus was EUR 243 million.

This year’s budget deficit is projected at EUR bn 3,314 or EUR bn 1,450 excluding the direct impact of COVID-related expenditure and measures to ease the cost of living crisis. Trends in budget aggregates are forecast to deteriorate in the coming months due to a greater impact of the adopted anti-inflationary and other measures. According to the latest IMAD forecast, this year’s macroeconomic conditions are expected to be more favourable than those forecast at the time of the budget amendment last autumn, as the nominal GDP is expected to exceed the autumn forecast by EUR 2.8 billion. Better macroeconomic starting points should not lead to an additional increase in projected expenditure in the expected budget amendment; at the same, we expect that the budget amendment will be more realistic than the one adopted last autumn.

Considering further requests for discretionary adaptation of various transfers from fiscal budgets, we again urge that any additional measures should be temporary and targeted. The adoption of measures with lasting effect increases the risk of prolonging the period of high inflation and the risk to medium-term sustainability of public finances. An additional reason for avoiding measures with a negative structural effect is the fact that, in view of the announced change in the economic governance system of the EU, the starting fiscal position will play the key role in determining the fiscal policy’s room for manoeuvre in the coming years. In the light of the latest requests for further extraordinary pension adjustments, we note that all types of pensions have increased on average in real terms since the beginning of the epidemic, and one-off additional transfers were also granted with a view to mitigating the consequences of the epidemic and the cost of living increase. This year, the relatively high regular adjustment will contribute to maintaining the real purchasing power of pensions; however, the adjustment could exceed the level of inflation next year due to the formula used to determine the level of the adjustment.

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