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Wednesday, July 17, 2024

(ECONOMIC POLICY) The budget has a deficit of 346 million euros in the first half of the year; Fiscal Council: Preparing autumn budget documents will require a more responsible approach

C. R., STA

The national budget recorded a deficit of 346 million euros in the first half of the year, but without the direct impact of intervention measures, this would have been 60 million euros, according to preliminary data from the Fiscal Council. They warn that the transparency of public finances is worse than before the pandemic, complicating the planning and monitoring of fiscal policy.

Excluding intervention measures, the growth of budget revenues in the first half of the year was 7.9%, significantly higher than the same period last year, when it was 0.5%. According to the Fiscal Council, this is almost exclusively due to higher corporate income tax revenues because of last year’s tax settlements. There was also a notable contribution from personal income tax revenues, while the growth of VAT revenues slowed.

The growth of budget expenditures, excluding intervention measures, also increased to 10.6%, compared to 7.2% in the first half of last year. The Fiscal Council attributes this to the category of other expenditures. In June alone, these amounted to around 350 million euros, while in the previous five months, they totalled slightly less than 500 million euros.

Within the intervention measures, a total of 193 million euros were paid out in the first six months for flood damage restoration, with about half of this amount going to watercourse repairs. An additional 94 million euros were paid out to address the consequences of high prices, mostly to electricity and gas suppliers. Another 10 million euros were paid out from the national budget this year for COVID-19.

Like the national budget, pension and health funds, as well as municipal budgets, also have deficits. The deficit of the public sector – the public finance deficit – in the first quarter of this year was 300 million euros, which is 140 million euros or one percentage point less than in the same period last year. The lower deficit was mainly due to intervention measures, for which around 200 million euros less was paid out this year compared to last year.

By the end of the year, deficits are expected to fall below the limits set in current budget documents, according to the Fiscal Council and other domestic and international institutions.

The Fiscal Council warns that due to numerous intervention measures and the lack of a systematic approach to long-term challenges, the transparency of public finances is worse than before the pandemic. This lack of transparency is especially evident in transfers between funds, the formation of extensive reserves, and the non-transparent operations of budget funds. They urge the government to approach the preparation of autumn budget documents more responsibly.

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