Ak by pokračoval pomalý hospodársky rast, a
nedarilo by sa znižovať nezamestnanosť a zároveň znižovať výdavky verejnej
správy, viedlo by to k dlhodobej tvorbe vysokých deficitov, ktorá by dôveru
investorov mohla významne naštrbiť.Vážne problémy by v prípade ničnerobenia
mohli nastať v horizonte 4 – 5 rokov, povedal okrem iného na margo
nelichotivého stavu slovenských verejných financií pre The Slovak Spectator dňa
3.5. 2010 Radovan Ďurana z INESS.
BACK in 2008, Slovakia boasted one of the fastest growing
economies in the European Union and oozed confidence about its ability to tame
the public finance deficit. A year later, squeezed by the global economic
downturn, Slovakia had not only failed to keep its deficit under 3 percent of
gross domestic product (GDP) – the limit defined by the Maastricht criteria for
euro membership – but had seen it almost triple.
The government was quick to blame the global downturn – and
towns, villages and public schools for consuming more. State officials also
pointed their fingers outside Slovakia and argued that the country’s
performance wasn’t much worse than the European Union average.
Market watchers agree that no one expected Slovakia to
emerge from the crisis unscathed, especially given the fall in tax revenues and
the government’s need to spend more money than it had back in 2008, when the
country’s economy was running like a well-oiled engine.
But observers also warn that a higher deficit has inflated
the state’s debt, thus instantly raising interest expenses. Well-targeted
trimming of budgets, and disciplined, transparent procurement could provide
some relief, market watchers say.
Slovakia’s public finance deficit stood last year at 6.77
percent, almost triple the 2008 deficit of 2.3 percent of GDP, according to
data provided to the EU statistics authority by the Slovak Statistics Office.
Eurostat confirmed that Slovakia’s public finance deficit was 6.8 percent in a
report released on April 22.
This compared to a eurozone average of 6.3 percent, and an
average deficit across the whole European Union of 6.8 percent of GDP.
Slovakia’s gross public debt swelled to 35.66 percent of GDP
in 2009 from 27.69 percent in 2008. Actual public debt fell slightly, but this
still represented a rise in GDP terms because of the significant contraction in
the country’s GDP last year, the SITA newswire reported. Average public debt in
the eurozone stands at 78.7 percent of GDP, while the EU average stands at 73.6
percent of GDP.
The government has meanwhile made plans to trim the deficit
to 5.5 percent of GDP in 2010, but some market watchers have warned that this
appears unrealistic.
The plan counts on
higher output in the economy and higher tax incomes than the state had in 2009,
Radovan Ďurana of the economic think tank INESS told The Slovak Spectator.
“However, the current
prognosis has already reduced the estimate of employment growth, [and predicts]
slower growth in the average wages and consumption of households,” Ďurana said.
“These are factors which will directly impact revenues from income taxes and
payroll taxes this year. Since neither the outgoing government nor the new one
will manage to pass fundamental savings measures and thus will not reduce the
volume of state spending, it is probable that the deficit [target] will not be
met.”
The 2009 public finance deficit numbers did not come as a
big surprise for Slovakia’s market watchers, Poštová Banka analyst Eva Sadovská
told The Slovak Spectator.
The Finance Ministry had expected the deficit to stand at
6.3 percent of GDP. The apparently small difference between the estimate and
the actual performance is significant, according to Sadovská, because of the
scale of extra spending it represents.
“For those who do not consider the difference of a few
tenths of a percent significant, in practice five tenths of a percent
represents about €300 million,” Sadovská said. “It is not little.” She pointed
out that Slovakia is obliged to keep its deficit under 3 percent of GDP in
order to observe the Maastricht criteria – i.e. to more than halve its deficit.
Market watchers suggest that even though Slovakia was
squeezed by the global downturn in 2009, public spending has increased
year-on-year by more than 10 percent, just as it did in the previous year, when
the country’s economy was still growing. This has put Slovakia in the
unenviable position of having posted the highest growth in public spending
among all 27 EU member states. Yet Slovakia has also had one of the smallest
drops in revenue, of 1.5 percent.
“The volume of tax revenues could hardly have been
influenced last year,” Sadovská said. “In terms of spending, it is not enough
to keep repeating the expression ‘insufficient spending’ either. Higher
expenses might have some justification, but only if they are meaningful and
support the economy.”
As for the burden
that higher deficits put on the shoulder of the state, Ďurana said that this
also means higher state debt.
“Higher state debt
means immediately higher expenses: specifically, last year’s growth in the
state’s debt means €32.60 higher interest costs per capita,” Ďurana told The
Slovak Spectator. According to him, if a greater part of the taxes collected
are used to pay interest, fewer funds will remain for education and health
care, for example. Ďurana offered an interesting comparison: the growth in
interest charges on public debt last year was equivalent to the entire budget
of the Culture Ministry.
Ďurana said the
publication of an updated tax revenue forecast was one thing the government
should do to make its plan to cut the state deficit to 5.5 percent of GDP more
realistic.
“The tax committee
organised by the Finance Ministry last met seven months ago,” Ďurana suggested.
“Updating the tax revenue [prognosis] would make it possible to estimate more
precisely what shortfall in taxes the cabinet faces. The deficit is so huge
that its reduction will be possible only by adopting structural reforms or
thanks to rapid economic growth. Since the second option is currently highly
improbable, the government should set goals for savings and carry out audits
and analyses which would lead to savings.”
Ďurana also said that
efficient savings would not be possible without making cuts to the social
welfare system, which is not sufficiently targeted. For example, he said, some
benefits are paid to the rich; or, instead, are performance-based when they should
not be, for instance pensions or unemployment benefits.
“If we do not carry
out these reforms now we might face the fate of Hungary or Latvia, which have
had to cut expenses based on IMF recommendations,” said Ďurana. “Such cuts are
then more painful.”
Sadovská, however, does not believe that the state will
achieve significantly more belt-tightening or more effective drawing of
European Union funds.
“It will not be any surprise if this year’s deficit
approaches the 6-percent level,” said Sadovská.
Greece’s gigantic problems with public finances have been
closely watched recently and the media cannot avoid asking the question: is
there such a threat for Slovakia?
“If slow economic
growth continues and unemployment is not pushed down, along with cuts to the
state administration costs, this could lead to the long-term creation of high
deficits, which could considerably damage the trust of investors,” said Ďurana.
He suggests that serious problems might emerge if no action is taken within 4-5
years.
There are, however,
no parameters to determine when a country will go bust, Ďurana said. But he
added that the supply of money from foreign investors could dry up if they view
Slovakia’s public finances as too risky and thus lose interest in buying the
country’s debt.
The
Slovak Spectator, 3 May 2010, Beata Balogová
