Wednesday, January 2, 2008

Historically Lowest Budget Deficit Confirms Slovak Euro Ambitions

The 2007 state budget ended up in a deficit of 23.5 bn SKK (712 mil EUR) at the end of December. Relative to the Gross Domestic Product (GDP), this constitutes 1.3%, which is a historical low (data available since 1995). The budget was originally planned with a shortfall of 38.4 bn SKK. The narrower-than-planned budget gap was caused by 2007 state revenues being almost four percent higher than those budgeted, thanks to record economic growth, while the actual state spending almost exactly matched the plan. Together with the negative balance of regional administration and social security, which is estimated at 1.1% of GDP in the latest update of the Finance Ministry, the figure means that the general government deficit will most probably lie at 2.4% of GDP. Public finance deficit of this size satisfies the 3.0% of GDP Maastricht convergence criterion necessary for adopting the common currency in January 2009.

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