According to the Fiscal Rule Act, the Fiscal Council is obliged to submit a report on its activities in the previous year to the National Assembly of the Republic of Slovenia by the end of May each year. Under this law, adopted in June 2015, the Fiscal Council is an autonomous and independent state authority that prepares and makes publicly available assessments on the compliance of fiscal policy with fiscal rules.
With exceptional circumstances still in place until the end of the year, fiscal policy seemingly had more room for manoeuvre in 2023 and remained expansionary despite favourable macroeconomic trends. While the general government deficit was smaller than projected, this is more evidence of the weaknesses in fiscal planning that the Fiscal Council has consistently pointed out, than of austerity. In particular, fiscal planning is flawed in terms of including oversized investment plans, which exceed the absorption capacity of the administration and providers and which, in addition to inefficiencies, can lead to irrational decisions.
The relatively favourable macroeconomic context has not been sufficiently used to strengthen fiscal sustainability. The deficit is projected to be higher in 2024 than the outturn in 2023. Government debt increased in nominal terms last year and declined in relative terms, mainly due to inflation-driven growth in nominal economic activity. Moreover, key challenges to the sustainability of public finances were not addressed in the previous year either.
The last year of the agreed exceptional circumstances and the need to return to a functioning system of economic governance in the EU have run parallel to the process of adopting new fiscal rules. These are primarily aimed at ensuring medium- and long-term sustainability of public debt in a way that allows for individual adjustment paths by Member States. It is important that the EU and its Member States maintain their position as a reliable partner in financial markets through credible rules. The EU’s ability to enforce the new rules is the best basis for investor confidence and thus for unhindered financing across the EU. The new rules will also require legislative adaptation in Slovenia.
The Fiscal Council will continue to consistently pursue its mission to monitor and warn about the sustainability of public finances in the medium and longer term. Here the main tool remains the power of argumentation. In particular, the public presence of the Fiscal Council, facilitated by the media, ensures that the general public can follow independent views on fiscal policy. In this way, the Fiscal Council creates indirect pressure on democratically elected decision-makers, while at the same time we also strive to support these decision-makers to take fiscally sustainable decisions through our assessments.