An empty gesture? The expenditure ceiling will not be budgeted

The government’s knocked-out correction mechanism from the workshop of Finance Minister Ladislav Kamenický appears to be an empty gesture. He has to tame the expenses in the budget. It gives them a clear ceiling. The result should be a return to balanced management.

From this step of the government, however, it is clear that the budget itself has gaps. But also that last year’s criticism of Brussels against our law of the year was justified. The result is a toothless limit for the future government. Right on her should be the safeguarding of the expenditure ceiling of EUR 39.326 billion, which would the deficit was kept at 0.49 percent of gross domestic product product (HDP).

“The correction mechanism is a toy of political marketing rather than necessary tool, ”says Finlord.cz analyst Boris Tomčiak. Basically According to him, planning is primarily the state budget. And with his In preparation, care should be taken to ensure that public finances are long-term sustainable.

“If the state budget is prepared correctly, it is not necessary negotiate a correction mechanism, “says the analyst. It is not possible according to him to argue that half a year ago when drawing up the budget was economic situation different. In recent months, the Slovak nothing unexpected happened to the economy, adds Tomčiak.

Kamenický’s people were based on setting a limit for spending approved budget. “It means that there will be no public administration entities be able to spend more than they have approved in the budget, “says the ministry finance. It is also due to publish so-called monitoring in May and August compliance with the expenditure limit – that is, whether individual ministries they don’t spend more than they got. The question remains how they want to guard the finances self-government. They manage independently.

Threat to investment

The knocking down of the expenditure ceiling is also read by Tomčiak in preparation for the election defeat. “By capping spending, the current government has worsened the conditions for possible accession of a new government, “he says. Probability of premature elections in the next three years is therefore very high, according to the analyst. But political disagreements and early elections always add to the extremist parties, adds the analyst.

From an economic point of view, according to the analyst, the most important stable public finances, so the budget deficit should be at the time of expansion, relatively low. The capping of public spending is according to Tomčiak, the road, but the structure of the ceiling will be important. “It must be reduce spending in non-productive areas. Capital expenditures up to development of Slovakia, on the contrary, should increase, “adds the analyst. No limitation expenditure may ultimately lead to a disproportionate ceiling for investment.

We are waiting for the return of growth

The analyst of Poštová banka considers the approval of the correction mechanism Jana Glasová for a step in the right direction. The management of public administration is deteriorated since the pre-call. However, the budget deficit was also pushed by the weaker one performance of the economy last year.

“Even in conditions of weaker economic performance, it is necessary to keep public finances under control, even when there is pressure on public budgets in such a situation bigger, “says Glas. However, according to her, it remains questionable how the government is eventually it will be able to meet the correction mechanism.

The risks on the expenditure side are considerable. Just mention the increase social benefits, such as minimum pensions or an increase in parental leave contribution. Also the management of local governments, which the government does not have under control. But also a further slowdown in economic growth.

According to the latest forecast of the Ministry of Finance, the general government deficit should be reach half a percent of gross domestic product. And a balanced budget would Slovakia should have had it in a year. However, Glas considers this to be relatively boldly.

“Achieving a balanced public administration budget depends on recovery of our economy, but there is still a big question mark about it, “ says the analyst. According to Glas, the biggest threats are Brexit, trade war between Washington and Beijing, but also declining performance global economy.

The government’s knocked-out correction mechanism from the workshop of Finance Minister Ladislav Kamenický appears to be an empty gesture. He has to tame the expenses in the budget. It gives them a clear ceiling. The result should be a return to balanced management.

From this step of the government, however, it is clear that the budget itself has gaps. But also that last year’s criticism of Brussels against our law of the year was justified. The result is a toothless limit for the future government. Right on her should be the safeguarding of the expenditure ceiling of EUR 39.326 billion, which would the deficit was kept at 0.49 percent of gross domestic product product (HDP).

“The correction mechanism is a toy of political marketing rather than necessary tool, ”says Finlord.cz analyst Boris Tomčiak. Basically According to him, planning is primarily the state budget. And with his In preparation, care should be taken to ensure that public finances are long-term sustainable.

“If the state budget is prepared correctly, it is not necessary negotiate a correction mechanism, “says the analyst. It is not possible according to him to argue that half a year ago when drawing up the budget was economic situation different. In recent months, the Slovak nothing unexpected happened to the economy, adds Tomčiak.

Kamenický’s people were based on setting a limit for spending approved budget. “It means that there will be no public administration entities be able to spend more than they have approved in the budget, “says the ministry finance. It is also due to publish so-called monitoring in May and August compliance with the expenditure limit – that is, whether individual ministries they don’t spend more than they got. The question remains how they want to guard the finances self-government. They manage independently.

Threat to investment

The knocking down of the expenditure ceiling is also read by Tomčiak in preparation for the election defeat. “By capping spending, the current government has worsened the conditions for possible accession of a new government, “he says. Probability of premature elections in the next three years is therefore very high, according to the analyst. But political disagreements and early elections always add to the extremist parties, adds the analyst.

From an economic point of view, according to the analyst, the most important stable public finances, so the budget deficit should be at the time of expansion, relatively low. The capping of public spending is according to Tomčiak, the road, but the structure of the ceiling will be important. “It must be reduce spending in non-productive areas. Capital expenditures up to development of Slovakia, on the contrary, should increase, “adds the analyst. No limitation expenditure may ultimately lead to a disproportionate ceiling for investment.

We are waiting for the return of growth

The analyst of Poštová banka considers the approval of the correction mechanism Jana Glasová for a step in the right direction. The management of public administration is deteriorated since the pre-call. However, the budget deficit was also pushed by the weaker one performance of the economy last year.

“Even in conditions of weaker economic performance, it is necessary to keep public finances under control, even when there is pressure on public budgets in such a situation bigger, “says Glas. However, according to her, it remains questionable how the government is eventually it will be able to meet the correction mechanism.

The risks on the expenditure side are considerable. Just mention the increase social benefits, such as minimum pensions or an increase in parental leave contribution. Also the management of local governments, which the government does not have under control. But also a further slowdown in economic growth.

According to the latest forecast of the Ministry of Finance, the general government deficit should be reach half a percent of gross domestic product. And a balanced budget would Slovakia should have had it in a year. However, Glas considers this to be relatively boldly.

“Achieving a balanced public administration budget depends on recovery of our economy, but there is still a big question mark about it, “ says the analyst. According to Glas, the biggest threats are Brexit, trade war between Washington and Beijing, but also declining performance global economy.