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Analysts: Cuts in Public Deficit Ambitious But Feasible Plan
Tuesday 20 July 2010 Zoom in | Print page
Bratislava, July 20 (TASR) - Slovakia's plan to lower its public finance deficit by 2.5 percent of GDP next year is rather ambitious but still feasible, analysts approached by TASR have concurred.
"If the mission to reduce the deficit by 2.5 percent is successful, it will be a positive signal to investors," said Slovenska Sporitelna bank analyst Michal Musak.
Finance Minister Ivan Miklos estimated that the cuts necessary to reduce the deficit in 2011 will actually total €1.66 billion. "It's the sort of recovery that shouldn't undercut economic growth on one hand, but should allow us to achieve that 3 percent in 2013 on the other," he said on Monday, adding that the Government will have to pass measures on both sides of the budget - in incomes and expenditures.
"The Government is limited by the European Commission's demand to squeeze it down to 3 percent of GDP by 2013. So I think a good solution would be to take most of the necessary steps at the beginning of the election period," commented Musak.
According to INESS analyst Radoslav Durana, the ambition to cut the deficit towards the 3-percent threshold will require the adoption of conceptual reforms, the setting of priorities and cuts in allocations to both the public sector and companies. "Improvements in transparency and reducing clientelism in public procurements won't be enough," said the analyst. Relying on a rise in tax revenues isn't a good way either, as the employment rate is likely to grow only moderately, he said.
The International Monetary Fund (IMF) has reported that the prospects for Slovakia's economy are relatively positive. It estimates that this year's growth in GDP will reach 4 percent, while Slovakia's financial authorities are taking a more conservative approach in their official prognoses. The Finance Ministry expects the economy to grow by 3.2 percent, while Slovakia's central bank (NBS) is slightly more optimistic, projecting growth to reach 3.7 percent.
"An important precondition for meeting our fiscal ambitions and for the economy to grow is for the economies of our major business partners, Germany in particular, to continue to resurrect themselves," said VUB bank analyst Zdenko Stefanides.
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