In the first eight months of 2023, the state budget recorded a deficit (of EUR 735 million), which amounted to EUR 95 million excluding the impact of expenditure to contain the epidemic (EUR 161 million) and measures to mitigate the cost-of-living crisis (EUR 479 million).
The eight-month outturn confirms the Fiscal Council’s assessment on continued unrealistic budget planning, which can form an inappropriate basis for the high level of expenditure set for the following years. Given the outturn so far, the second revised state budget for 2023, adopted in August, allows for a deficit in the amount of EUR 2.4 billion in the last four months of this year. That would mean EUR 1 billion more than last year’s total and approximately two times as much as in the last four months of 2020, i.e. during the pandemic. To the extent allowed under the revised state budget, the actual deficit outturn by the end of the year would be unjustified in the Fiscal Council’s assessment, in light of numerous challenges. We expect the 2024 and 2025 budget presentations to include a realistic assessment of this year’s outturn, which should be the only appropriate basis for projections.
The Fiscal Council defined the August natural disaster as an extraordinary macroeconomic and fiscal shock. A complete rectification of its consequences, including appropriate modifications that would prevent such repercussions of any similar events in the future, will require years of effort, in terms of both financial resources and improving the efficiency of public institutions in public spending for these purposes.
As the process of assessing the actual damage is still ongoing and it is therefore impossible to determine the exact amount of financial resources required, certain measures adopted thus far seem to be premature. This mostly concerns the decision to take out extensive additional loans under the Recovery and Resilience Plan, where deadlines for the implementation of projects are extremely short and Slovenia already faces significant problems in meeting milestones, and the decision to introduce additional, albeit temporary, tax charges on the population and businesses, not least in light of the economic cool-down. The Fiscal Council believes that, before making such decisions, it would be sensible to wait for the preparation of budgets for the next two years to find reserves that could account for the changed priorities in the planned expenditure.