Slovenia’s fiscal watchdog cautions against politically-motivated spending ahead of election

Italian lawmakers have unanimously approved the Drat Budgetary Plan worth 24-€25 billion. [shutterstock/Pra Chid]

The Fiscal Council, which oversees the country’s compliance with the balanced-budget rule, has warned the government against excessive spending in the run-up to the general election scheduled for next year. it stressed that exceptional circumstances “should not be used to adopt measures that reflect the final stage of the political cycle”.

“The existence of extraordinary circumstances in 2022 merely provides for a flexibility of fiscal policy to directly address the challenges related to the epidemic, while additional stimulus measures … are not justified,” given the latest projections of stronger-than-expected GDP growth for this year.

The watchdog noted that the European Commission had urged member states to adopt fiscal policies that reflect the level of recovery attained and various risks to mid-and long-term fiscal sustainability.

“The Fiscal Council believes that fiscal policy’s excessive support of economic growth with substantial deficits could in the coming years lead to the creation of macroeconomic imbalances, increase the scope for ineffective spending of public funds, narrow the scope for creating a wiggle room to act in difficult times, and make it harder to move to the corrective mechanism procedure,” it added.

The government has recently adopted an amendment to the budgeting decree which raises the expenditure ceiling by €670 million to €14.99 billion this year to accommodate higher outlays for the fight against the coronavirus epidemic.

However, faster-than-expected economic growth has led to significantly higher budget receipts and the budget deficit is projected to stand at 7.9% of GDP at the end of the year compared to 8.6% of GDP planned in the existing budget law.

The general government spending ceiling will increase by €500 million to €25.8 billion, and the general government deficit is projected to stand at 7.5% of the GDP.

(Ela Petrovčič | STA)

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