Finance Minister Dušan Mramor happy: Slovenia is ready to leave the excess deficit procedure after seven years; the hard work has paid off
Finance Minister Dušan Mramor said he was happy with the assessment by the European Commission that Slovenia was ready to leave the excess deficit procedure after seven years, but stressed efforts to reduce debt and bolster economic growth must continue. “The hard work has paid off, but there is no rest until 2020: we must focus on ensuring maximum growth,” Mramor told a press conference in Ljubljana.
He said Slovenia had defied projections from abroad by reducing its general government deficit to below 3% of GDP last year. The Commission concluded that budgets in the coming year will ensure it remains under this threshold, which would allow the country to exit the excess deficit procedure. Mramor said efforts must now focus on increasing economic growth and reducing public debt as part of the fiscal rule targets.
Following 2.9% growth in 2015, Slovenia’s economy is forecast by domestic and foreign institutions to post growth rates ranging from 1.5% to 2.0% this year, while slightly more robust growth, that of up to 2.5%, is forecast for 2017.
In this vein, he said Slovenia must be cautious that pressure on public spending does not grow. The country’s obligation under the fiscal rule includes reducing the deficit by 0.6% a year, which is equal to EUR 240m. “This is by how much expenditure growth must trail revenue growth which means there is no rest,” said Mramor, who highlighted that the more painless way to achieve the goal is through faster economic growth. He also said the Commission had realised that its current methodology for calculating the deficit targets as part of the fiscal rule was faulty. Calculations using this methodology had suggested the economy was headed for overheating, which would require Slovenia to make even deeper cuts in spending in 2017.
“We maintained that this was wrong,” he said, adding that the country was happy that it won that argument and would not need to make overly painful cuts next year. Responding to the set of recommendations in four areas issued by the Commission to Slovenia, Mramor said that the country was already hard at work preparing measures. In the pension system, the government is getting ready to finalise new measures for reducing spending from plans drawn up in the White Book this year.
He said it was also working on health reform and further fiscal consolidation, including on the appointment of the independent members of the Fiscal Council, which would oversee Slovenia’s efforts in reducing debt. One of the main goals is to improve job prospects for the elderly unemployed and low skilled workers, another recommendation issued by Commission, said Mramor. “If we want to see a rise in contributions and taxes paid by the working population, we must address the fact that Slovenia has one of the lowest rates of employment among those over 55,” he said.