According to provisional data, the state budget deficit amounted to EUR -342 million in the first eight months of 2022, while, without taking into account the direct effect of COVID-related measures, there would have been a surplus of EUR 189 million.
Revenues increased by 16.7% year-on-year in the first eight months of 2022 and 20.2% without taking into account the direct influence of COVID-related measures.
Expenditure in the first eight months of this year was -9.4% lower on a year-on-year basis, or 10.5% higher on a year-on-year basis excluding the direct effect of COVID-related measures totalling EUR 637 million.
The total level of state budget expenditures for COVID-related measures from March 2020 to the end of August this year amounts to EUR 5,430 million.
The financial impact of the measures taken so far to mitigate the consequences of price increases on the state budget this year is estimated at around EUR 325 million, and the impact of all measures is estimated at around EUR 650 million. Next year, the measures with an impact on the state budget taken so far could amount to around EUR 150 million, totalling around EUR 250 million. Measures to mitigate the effects of the price increases are similar to those in other countries, but they are not targeted to a large extent. In the face of expected increasingly constrained fiscal space, this may prove to be ineffective and contrary to the recommendations of international institutions.
The state budget’s outturn in the first eight months suggests that, despite the measures taken to mitigate the effects of inflation, the deficit should be smaller this year than foreseen in the amendments to the current budget adopted in autumn last year. This is mainly due to higher-than-expected tax revenue growth, mainly as a result of the recovery in domestic consumption, as well as high inflation and another failure to achieve over-optimistic investment plans.
While revenue growth is expected to slow down in the last four months of the year, the current budget allows for a turnaround in the development of consumption, which could be 12.0% higher year-on-year to meet budget projections, and a deficit of EUR 2,130 million in the months through the end of the year. However, the government intends to increase the state budget’s expenditure ceiling by a further EUR 600 million when drafting the revised state budget. We consider that this could have been avoided with an appropriate reallocation of commitment appropriations, in particular when identifying unrealistic investment plans. Using revenues from high inflation to increase spending instead of reducing debt is inappropriate given the high risks to Slovenia’s medium- and long-term fiscal sustainability compared to other EU countries. If the announced increase in permissible spending materialises, the practice of the past two years of non-transparent and unreliable budget planning in times of exceptional circumstances will continue.