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Analysts: Maintaining Deficit at 5.5 % of GDP Difficult But Possible
Thursday 01 April 2010 Zoom in | Print page
Bratislava, April 1 (TASR) - The deficit of the state budget has grown to €983 million in March 2010 from €780 million in February. In March of 2009 the deficit was at €205 million. However, Volksbank Slovensko analyst Vladimir Vano thinks that Slovakia is still on track to keep this year's deficit under 5.5 percent of GDP.
For 2010, the projected deficit is to reach a record-setting €3.746 billion. "March's deficit amounted to 26.3 percent of the 2010 plan. Hence, after 1Q10, the deficit has reached approximately one fourth of the planned total sum for 2010," said the analyst.
According to him, budget revenues have reached only one fifth of the total 2010 plan so far. Vano suggests that this is due to the slower drawing of the European funds rather than the customary delay in tax collection.
Revenues stemming from income tax panned out relatively better in 1Q10, said Vano. "In the case of legal entities, income tax revenues reached 27.6 percent of the total 2010 plan, with tax revenues from individuals reaching 30.9 percent. The excise taxes amounted to exactly one fourth of the plan," said Vano, adding that it's only VAT tax that yielded smaller revenues - namely, one fifth of the projected 2010 plan.
However, UniCredit Bank analyst David Derenik points out that the income tax revenues from legal entities were lower y-o-y by 35 percent. "This corresponds with the overall economic situation in 2009," said Derenik, adding that the shortfall in income tax revenues has been partially offset by increased VAT collection - hence, total budget revenues are higher by 4.2 percent y-o-y.
Covering as much as one-third of this year's payments towards cutting the state debt, along with monthly payments to finance the second (capitalisation) pillar, contributed to a significant increase in budget expenditures y-o-y, according to Slovenska Sporitelna analyst Maria Valachyova. She also pointed out that the budget this year also features SP's (state-owned social insurer) expenditures, whereas previously these expenditures were ex-budget.
As far as the development of the nation's finances are concerned, Valachyova is not quite so optimistic. "The deficit can reach more than projected 5.5 percent of GDP if the new Government doesn't begin to carry out austerity measures or the economy in late 2010 surprises us with better-than-expected growth," said Valachyova.
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