Deficit will definitely exceed 3% in 2009 - Pociatek

June 17, 2009

SLOVAKIA'S public finance deficit will exceed the three-percent threshold of per GDP called for by the budgetary rules of the European Union, Finance Minister Jan Pociatek said on Tuesday. The minister confirmed the figure during the presentation of the finance ministry's new prognosis that forecasts Slovak economy to contract by 6.2 percent.

"It's obvious that Slovakia, too, will fall victim to an excessive deficit and will be among the majority of countries of the EU that will end up there this year, with only a few exceptions," Pociatek said. However, he refused to specify the expected amount of Slovakia's deficit this year. The estimates of impacts of the significant slump of the economy on tax and contribution revenues of the state will be not ready before next week.

According to Pociatek, the ministry will prepare the revision of this year's budget in September. However, more important than this year's budget will be the course of its further consolidation in the future.

"Much more important from our perspective is what the years after 2009 will look like, or what our fiscal consolidation in the subsequent years will look like. This is what we want to concentrate on first and foremost," Pociatek said, adding that Slovakia will have to defend its consolidation plan also in the expected talks with the European Commission. At the same time, he emphasised that any changes in the budget will not have an impact on social programmes for people.

According to the new official prognosis that the finance ministry published on Tuesday the Slovak economy will slump by 6.2 percent this year. Thus after a long fence sitting the ministry significantly re-assessed its previous prognosis from February, in which it forecast growth of 2.4 percent. The re-assessing of the estimates follows from the fact that compared to the prognosis from February, the external environment of Slovakia's economy has deteriorated significantly.

According to Pociatek, the finance ministry has tried to make as conservative prognosis as possible, and despite the possible risks it's probable that the real development of Slovakia's economy will be better than the expectations indicate today. At the same time, the ministry expects an economic revival to come as soon as next year, namely at the level of 1.1 percent. Subsequently, the growth of economy should accelerate to 3.4 percent in 2011, and 4.8 percent in 2012.

Meanwhile, National Bank of Slovakia presented its own prognosis on Tuesday. Just like the finance ministry, it re-assessed the expected slump of Slovak economy and its estimate went from -2.4 percent to -4.2 percent. The central bank too, expects the revival of Slovak economy as early as next year and is forecasting growth of 2.4 percent and in 2011 as much as 4.1 percent.

A significant difference in the latest prognosis between NBS and the finance ministry was reasoned by the central bank's governor Ivan Sramko by the different dates which these institutions assessed the available data. Unlike NBS that closed the assessed period in mid-May, Sramko said the finance ministry had statistics for April, which were published later, at its disposal. "If the finance ministry's estimates a greater drop in GDP than we did, then it's based on the fact that they worked with data, which were not available for us before May 13th," Sramko told journalists.