Both the general government and the public finance budgets are running deficits at the start of the year. This is the result of high growth in “core” expenditure, against a background of favourable revenue dynamics, mainly reflecting labour market conditions and also high nominal wage growth due to inflation. The end-of-year deficits, as estimated by the Fiscal Council and other domestic and international institutions, will be lower than in the current year’s budget documents in force, which were again marked in particular by excessive expenditure planning.
The transparency of public finances is worse than before the epidemic, making fiscal policy planning and monitoring more difficult. This is the result of a number of intervention measures and the lack of a systematic approach to long-standing challenges. The lack of transparency is particularly evident in transfers between public finance budgets, the building up of large reserves and the non-transparent operation of budget funds. Greater transparency is one of the key conditions for ensuring efficient public spending.
This year’s outturn so far confirms once again that budget planning is plagued by a number of shortcomings. These and the changed fiscal rules, which require more credible and medium-term-oriented planning, will require a more responsible approach to the preparation of the autumn budget documents.