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FISCAL POLICY OF SLOVAKIA AND ITS IMPACT ON THE STATE BUDGET DEFICIT

Eleonora Matouskova

Abstract

The problem of many European Union countries has been for a long time a high deficit of public finances and also high public debt. This situation resulted in the year 2012 to debt crisis, which need to be addressed by non-standard measures of economic policy. Although Slovakia never fell between countries with excessive public debt, however, since the formation of independent Slovak Republic in 1993 never reached a balanced state budget. The government, therefore, has developed „The stability program of the Slovak Republic for the years 2018 to 2021“. The aim of this article is to evaluate implementation of the government objectives in the field of public finances development. The original intent of the government was to achieve a balanced state budget already in the year 2017. Achievement of this objectives was later delayed for a year 2020. According to Eurostat data, a general government deficit reached in Slovakia in 2016 1.7% of GDP and in 2017 1.0% of GDP. Consolidation effort has exceeded the requirements of The stability and growth pact, when it had reached 0,93% of GDP. The long-term sustainability of public finance was improved. The gross debt of the general government is reduced and currently represents 50.9% of GDP. Slovakia is located in the first penal zone (in total, there are five zones of the debt brake), as the upper limit of debt is set at the level of 50% of GDP. This means for the Ministry of Finance to justify the debt amount to the National Council and suggest measures to reduce it. Fiscal policy will have a mild impact on economic growth. From the projected fiscal impulse in the amount of 0.5% of GDP in 2018 is estimated positive impact on GDP growth of 0.3%. Government spending will be focused on government priorities, in particular in the field of capital investments and for the compensation of public employees. Mild fiscal restriction, which will be applied at the rate of 0.3% of GDP, needed to achieve the financial objectives, temporarily will slow the GDP growth in the year 2019 to about 0.2%. Fiscal policy will have a positive impact on the Slovak economy again in the year 2020 and will accelerate growth by 0.2%.

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DOI resolver: doi.org/10.5593/sgemsocial2018/1.3/S03.024

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