Slovak revenue boom narrows Jan-June budget gap

Reuters    Translate This Article
2 July 2008

BRATISLAVA (Reuters) - The Slovak state budget narrowed sharply in the first half of 2008, on an annual basis, as the booming economy continued to generate strong revenues ahead of euro adoption next year, data showed on Tuesday.

The finance ministry said the central state budget deficit—the main component of public finances—was 4.115 billion crowns ($214.7 million) in the January-June period, less than half the 10.999 billion crown gap recorded in the first six months of last year.

Revenues rose by 7 percent on the year to 156.208 billion crowns, while spending was up 2 percent at 160.323 billion at the end of June.

The overall public finance gap ceiling is 2.0 percent of GDP for 2008. 'But the first-half budget performance was positive and suggests the final deficit could be lower than expected,' said Piotr Matys, an analyst with London-based 4Cast.

The government of leftist Prime Minister Robert Fico has benefited from strong economic growth since taking power in 2006. Slovak gross domestic product grew by 8.7 percent in the first quarter of this year, the fastest rate in the EU.

Higher tax revenues have helped finance part of Fico's welfare programme in the first two years in office, such as lower value added tax on selected goods or bonuses for the poorest pensioners, while still cutting the fiscal gap under the euro adoption threshold of 3 percent of GDP.

Fico has said he will expand such policies in the second half of his term. The finance ministry is now calculating how much the cabinet can spend—without breaching the EU's deficit rules—on compensating people on low incomes for any financial disadvantage from the euro adoption, such as price rises.

(Reporting by Peter Laca; Editing by Ruth Pitchford)

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