The year 2020 is critical for the budget construction during the 2020-2022 periods. The way of applying the pension law in 2020 has a decisive role for the 2021 budge, according to the preliminary opinion of the Fiscal Council on the State Budget Law and the Social Security budget Law for 2020 released today.
In the Fiscal Council’s view, the biggest risk is that the budget deficit will rise steeply if no corrective measures are taken in 2020, which would affect the overall economic stability.
The preliminary assessment of the FC on the budget deficit for 2020 indicates significant risks of exceeding the target of 3.6% of GDP and a probable level of the deficit to range from 4.6 to 4.8% of GDP in 2020. It might rise to 6% in 2021 and to over 7% in 2022.
The FC’s opinion also says that a fragile budgetary construction for 2020 and particularly for 2021 would most likely lead to a deterioration in the sovereign rating and entry into the Excessive Deficit Procedure (EDP).
“Initiatives regarding tax cuts and spending increases when the budget situation is so tense are not justified, being contrary to the logic of budgetary consolidation. The state of the public budget remains extremely tense due to insufficient resources and very high pressures, both in the present and in the future. The slowdown tendency of economic growth, manifested at an international level, and potential external shocks pose risks to the budgetary consolidation process“, the document argues.