The Prime Minister of the Republic of Slovenia, Janez Janša, yesterday attended the 83rd extraordinary session of the National Assembly of the Republic of Slovenia, where the Presentation of the Budget Memorandum 2022–2023, Draft Amendments to the Budget of the Republic of Slovenia for 2022 and the Draft Budget of the Republic of Slovenia for 2023 were discussed.
Below is the Prime Minister’s Presentation at the National Assembly session.
During the pandemic, budget policy was adapted to the emergency situation and provided funding to protect the public’s health (vaccines, vaccination, testing, medical care, protective equipment). We continue to provide these funds and will need to do so for some time to come. We are also providing support to the economy and the population to mitigate the effects of the epidemic. It is probably unnecessary to list every measure taken. By doing so, the government made a relatively rapid economic recovery possible, which in 2021 will exceed the pre-crisis level of 2019.
The Institute of Macroeconomic Analysis and Development’s (IMAD) autumn forecast projects economic growth of 6.1% in 2021, with the favourable trend expected to continue in 2022, with economic growth of close to 5%, and GDP growth of close to 3.3% expected in 2023.
Economic recovery will continue to differ from sector to sector. Manufacturing, construction and related services will mostly reach or even exceed the 2019 level of activity this year.
Following a 4.2% fall in economic activity last year, the recovery of activities linked to international trade has continued this year, with manufacturing, transport and logistics taking the lead. Investment in equipment and machinery, imports and exports continues to grow.
The economic recovery will continue over the next two years. According to forecasts from Slovenian, European and international institutions, supply chain problems and related price pressures are expected to ease. Hopefully, they are correct. It is anticipated that, particularly in 2022, certain pandemic safeguards will unfortunately still be in place, and will limit full recovery in some sectors. This includes some service sectors and unfortunately there is no end in sight for travel restrictions.
Employment is on the rise again. Over the next two years, favourable trends will continue, but demographic trends will also bring to the fore increasing recruitment difficulties. The recovery of the labour market is expected to continue over the next two years, with the number of persons employed expected to increase by around 30,000 compared to the pre-crisis year. Demographic trends point to the need for the demographic measures that we are focusing on, as there is no other solution.
Development-oriented budgetary policies will also make an important contribution to growth by supporting economic recovery and resilience, both from domestic and EU sources. The economic and budgetary policy mix will focus on the withdrawal of temporary measures to deal with the consequences of the epidemic and the implementation of structural measures supported by investments in key areas.
The preparation of the budgets for the next two years is itself underpinned by the IMAD autumn forecast. These and other indicators show a significant improvement in trends in international trade, employment, service activities and private consumption.
The budgets have also been drawn up taking into account the Fiscal Rule Act, which permits a deviation from the medium-term fiscal balance goal in exceptional circumstances. This is on a temporary basis and for epidemic-related purposes only. This means that when assessing the fiscal position, expenditure directly or indirectly linked to mitigating the epidemic is covered by the general escape clause and allows for a deviation from the fiscal rules.
At the EU level, there is also a broad consensus among EU member states that fiscal policy should continue to support the recovery in 2022 and 2023. To this end, and in view of all the uncertainties surrounding the course of the epidemic and its social and economic consequences, the European Commission has decided that the general escape clause in force last year and this year will continue to apply next year.
State budget revenue for 2022 is projected to be 7% higher than the adopted budget. Revenue growth is expected to reach 3.3% in 2023, mainly due to higher tax revenue and the receipt of funds from the EU budget. Projections show that this year Slovenia has already surpassed the pre-crisis level of tax revenues from 2019, one of the best performances in the euro area and the EU.
The state budget expenditure is planned at EUR 13.9 billion in 2022 and EUR 13.4 billion in 2023. The expected recovery and the gradual phasing out of temporary epidemic-related measures are leading to a reduction in epidemic-related expenditure, while investment is being stepped up.
The state budget balance will consequently improve, driven both by expected revenue growth and by the impact of measures and investments on the expenditure side, in particular investments that will boost economic activity and consumption. The general government cash-flow deficit is estimated at 4.6% of GDP in 2022 and 2.7% of GDP in 2023, below the Maastricht level.
EU funds play an important role in the budgets. Funds from the Recovery and Resilience Facility in the budget proposals are expected to total EUR 330.8 million in 2022 and EUR 453.7 million in 2023.
According to the last estimates by the Ministry of Finance and European Commission, the estimated debt-to-GDP ratio of the general government sector was almost 24 percentage points below the euro area average in 2021. This means that it was nearly one quarter lower than the euro area average, which is always used as a benchmark. In other words, during the escalated epidemiological situation the increase in Slovenian debt-to-GDP ratio was below the average increase for euro area countries and the average increase of the entire EU. This data of course differs from the incorrect percentages and figures that have been repeatedly put forward in public.
Investments and investment transfers, which have been virtually non-existent over the past decade, constitute an essential development component of the budget. They will increase by more than EUR 2 billion next year and in 2023. This EUR 2 billion in investment transfers per year is probably the main reason for the haste and fury of the opposition parties, who would like to undermine the government less than a year before elections. Let us just remember how these funds have been spent in previous year, above all on all kinds of activity, on various paramilitary political structures or on the so-called non-governmental organisations based at the Metelkova 6 complex, which never delivered any results. Today nobody can list any of their achievements. However, the budget proposal, in which each year EUR 2 billion is spent on schools, kindergartens and everything else that Slovenians need, is presumably the reason for interference in the adoption of this important document.
Looking at investments and investment transfers, investment in Slovenian healthcare should be receive special focus. According to the investment act, almost EUR 2 billion of investment is earmarked for the 2021–2031 period and 200 million per year in the following two years. These investments are considerably larger than investments over the past decade. Other noteworthy investments include road and railroad transport and infrastructure works; investments in flood control and protection measures, drinking water supply, drainage and water treatment as well as other investments in the water sector; investments in kindergartens, primary schools and sports facilities, which are larger than in any year since 2008, including cumulatively; investments in culture, significant investments in science, digital connectivity, investments in the development and maintenance of shared server and licence infrastructure as one of the main foundations of digital transformation.
In relation to labour, family and social policy implementation, we expect a significant decline in the number of unemployed persons due to improving labour market conditions, and also markedly higher investments in the network of homes for the elderly and for ensuring rights to long-term care and developing the long-term care system.
Thus, the 2022 and 2023 budgets provide substantial funding for the construction or reconstruction and improvement of living conditions in at least 10 homes for the elderly with a total capacity of over 600 beds.
The size of the pension insurance fund will be increased each year, while ensuring stable and long-term care for pensioners. Alongside this, it should be noted that pensions will be adjusted annually on the basis of the increase in the average gross monthly salary and the average increase in consumer prices in the Republic of Slovenia, as determined and officially published by the Statistical Office of the Republic of Slovenia. The yearly bonus will be awarded to five pension income classes in slightly higher amounts than this year.
The draft budget for 2022 takes into account an indexation of pensions and other benefits of 4%, which translates into around EUR 236 million in cash terms.
Defence expenditure is planned at 1.31% of GDP in 2022 and 1.41% of GDP in 2023.
The agreement on the level of lump sum grants for 2022, which was reached unanimously with all the local communities and municipalities and which raises the amount of the lump sum grant for next year to EUR 645.00 and for 2023 to EUR 647.00, also provides for funds for the balanced development of municipalities, co-financing national communities and the municipalities with Roma ethnic communities, and for Triglav National Park.
Honourable Parliamentary Deputies,
We have presented you with two optimistic and development-oriented budgets, with unprecedentedly high amounts of funding for investments, the likes of which Slovenia has never had at its disposal before, with funding that is distributed fairly across the whole country and across all sectors, with funding that guarantees a social and sustainable component and development that is oriented towards the welfare of future generations.
Your vote in favour of these two budgets is a guarantee that the next two years will indeed be years of rapid growth, years of greater resilience and will bring a significant increase in Slovenia’s prosperity.