On 14 November 2024, the Fiscal Council hosted a delegation of the Internation Monetary Fund (IMF) within its consultative meeting in Slovenia.
The purpose of the visit was familiarisation with the near- and medium-term fiscal policy and reforms and adherence to the new EU fiscal rules and fiscal risks.
According to preliminary data, the state budget deficit for the first ten months of the year amounted to EUR 553 million, which was around half of the deficit in the same period last year. According to the latest available estimate by the Ministry of Finance, the end-of-year deficit is expected to amount to EUR 1,407 million, making the deficit in the last two months EUR 854.
Excluding the direct effect of the intervention measures, the deficit amounted to EUR 109 million, compared to a surplus of 96 EUR million in the same period last year. Total expenditure on intervention measures amounted to EUR 444 million, around two-thirds lower than in the same period last year. According to the latest available estimate by the Ministry of Finance, this year, EUR 713 million is earmarked for intervention measures (excluding the Reconstruction Fund).
The growth in “core” expenditure (excluding intervention measures) was 10.3% and strengthened compared to the same period last year (8.0%). The main reasons for this year’s growth were the transfer to the Pension and Disability Insurance Institute of Slovenia (ZPIZ) due to the high regular pension indexation and the high growth in payments to budgetary funds, in particular due to the establishment of the Reconstruction Fund.
The Fiscal Council, as part of its tasks under the Fiscal Rule Act, regularly warns of risks to medium-term fiscal sustainability. Such risks are also posed by the proposed Act Determining Intervention Measures for the Provision of Heat Supply in the Šalek Valley, which is not included in the regular budget documents. We assess that its fiscal implications will reduce the fiscal policy’s room for manoeuvre, that the proposed Act does not adequately present all possible solutions, and that it could also raise expectations for government action in other areas.
The Fiscal Council publishes Assessment of budgetary documents for 2025 and 2026 and opinion on the Medium-Term Fiscal and Structural Plan 2025–2028
According to preliminary data, the state budget deficit for the first nine months of the year amounted to EUR -462 million, which is EUR 300 million lower than in the same period last year. According to the latest available estimate by the Ministry of Finance, the end-of-year deficit is expected to amount to EUR -1,407 million, which is EUR 814 million lower than foreseen in the current budget adopted in October last year. Such a large reduction confirms the Fiscal Council’s view that the deficit projection at the time of last year’s budget adoption was again exaggerated.
Excluding the direct effect of the intervention measures, the deficit amounted to EUR -70 million and was approximately EUR 60 million higher than last year. Total expenditure on intervention measures amounted to EUR 393 million, almost a third less than in the same period last year. According to the latest available estimate from the Ministry of Finance, this year, EUR 713 million is earmarked for intervention measures (excluding the Reconstruction Fund).
The growth in “core” expenditure (excluding intervention measures) was 8.3% and slightly higher than in the same period last year (7.5%). The main reasons for this year’s growth were the transfer to the Pension and Disability Insurance Institute of Slovenia (ZPIZ) due to the high regular pension indexation and the high growth in contributions to budgetary funds, in particular due to the establishment of the Reconstruction Fund.
On 30 September, the Fiscal Council received the draft state budgets for 2025 and 2026 and the draft Medium-Term Fiscal-Structural Plan 2025–2028. As the existing Fiscal Rule Act (ZFisP) is inconsistent with the changes to the economic governance system in the EU, the role of the Fiscal Council in the adoption of the budgetary documents is not clear until the ZfisP is amended. Nevertheless, we will provide an opinion on the draft Plan together with the assessment of the state budget proposals in accordance with the Public Finance Act by 20 October. The Committee on Finance of the National Assembly of the Republic of Slovenia will discuss the draft Plan at its session on 4 October 2024.
According to preliminary data, the state budget deficit in the first eight months of the year amounted to EUR 431 million, which is EUR 300 million lower than in the same period last year. The lower deficit is mainly the result of higher revenues, despite the strengthening of growth in “core” spending, but also of lower spending on intervention measures. The end-of-year deficit is estimated to be less than foreseen under the current budget, adopted in October last year (EUR 2,221 million).
Excluding the direct effect of the intervention measures, the deficit amounted to EUR 72 million and was almost the same as in the same period last year. Total expenditure on intervention measures amounted to EUR 370 million, around a quarter less than in the same period last year. This year, EUR 1,244 million is earmarked in the current budget for intervention measures. We estimate that the implementation of intervention measures will also be lower than foreseen.
The growth in “core” expenditure (excluding intervention measures) was 9.0% and slightly higher relative to the same period last year (8.2%), increasing the risks in the event of a reversal of the economic situation.
The direct impact of the proposed tax changes on public finances is expected to be modest. Based on the draft legal acts, the positive impact is expected to be around EUR 8 million. The possible implementation of an increase in excise duties on certain alcoholic beverages would double the impact.
At the end of September, the Government will prepare the draft state budgets for 2025 and 2026 and the first four-year fiscal-structural plan under the reformed EU governance system. It is not yet known whether it will be submitted to the Fiscal Council for assessment and presented to the National Assembly before being sent to the EC. This would increase the transparency and credibility of fiscal planning.
The deviations of the macroeconomic and fiscal forecasts for the 2020–2023 period were larger than the long-term average. This is partly understandable, as this period was marked by large unexpected shocks. Although the 2020 intervention legislation provided for 2020 and 2021 to be excluded from the ex post analysis of forecast deviations, it is important that data from crisis periods are also included in the analyses, as they can have important implications for planning and public finances in the longer term. The ex post evaluation of forecasts of macroeconomic and fiscal aggregates excluding the impact of intervention measures also shows that deviations increased markedly on average over the last four years. This suggests the continuation of a lack of realism in fiscal planning. The increased deviations are particularly pronounced in the area of expenditure forecasts, which poses a risk of inefficient spending. At the same time, this approach to fiscal planning poses potential difficulties for target-setting in the context of reformed economic governance at the EU level, which will be centred on a multi-annual plan that cannot be revised. Its starting point should also be based on realistic forecasts of fiscal aggregates.