Slovakia's budget gap to reach 4.62% of GDP in 2012 finmin report

By bne IntelliNews December 20, 2012
Slovakia is not facing a risk of fiscal stress in the short-term, but it is exposed to a medium sustainability risk in the medium run and to a high risk in a long-term perspective, mainly due to the impact of ageing costs reflecting a rapidly ageing society, which has not been addressed in pension reforms prior to 2012, the European Commission said in its Fiscal Sustainability Report 2012. Slovakias government debt, which stood at 43.3% of GDP in 2011, is seen rising to 55.9% in 2014, below the EUs 60% threshold and well below the EU average of 88.8%. The structural primary deficit is forecast to improve from 3.8% in 2011 to 0.8% in 2014. The Commission said Slovakia should focus on resolutely continuing to implement measures enhancing the sustainability of public finances in the long term, including further containing age-related expenditure growth. The 2012 Ageing Report projects a significant increase in Slovakias total age-related public expenditure over the years 2010-60 - 7.5pps of GDP, against an EU average of 2.9pps of GDP - with public pension expenditure forecast to grow by 5.2pps of GDP, higher than the EU average of 1.4pps, while healthcare and long-term care spending is seen rising by 2.5pps, compared to an EU average of 2.0pps. Under a no-policy-change assumption, debt would increase from 55.9% of GDP in 2014 to 61.9% in 2020 and to 91.6% in 2030. Efforts should therefore be made to ensure that the debt ratio is put on a long-term downward path, the Commission said.

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