BRATISLAVA: Slovakia's budget deficit doubled in the first three months of the year on the back of lower revenues, data showed on Monday, raising the odds that the incoming government will have to take new measures to hit its fiscal promises to Brussels.
Prime Minister-designate Robert Fico has said his centre-left government, to be appointed on Wednesday, will raise taxes on the rich next year to cut the gap to below the European Union threshold of 3 percent of gross domestic product in 2012, from 4.8 percent in 2011.
The euro zone state's central state budget gap, calculated on cash-flow methodology, widened to 1.155 billion euros from January to March, from 655 million euros in the same period last year, the finance ministry said.
"A lower volume of collected taxes was the key factor behind the worsening development in the deficit. The most significant point was a low inflow of EU funds. These, however, are irregular," said Tatra banka senior analyst Juraj Valachy.
Grants and transfers, formed almost solely by the European Union funds, reached 388 million euros, well below the 640.3 million euros in the first three months of 2011.
The finance ministry said in a statement the drop in the EU funds will arrive with a delay without a negative impact on the overall deficit, and expected this year's gap at 4.4 percent, slightly below the projected 4.6 percent ceiling.
The January-March deficit was at 31 percent of the full year ceiling, almost double the 17 percent a year ago.
That raises the chances that adjustments, like expenditure limits floated by incoming Finance Minister Peter Kazimir, will be needed to meet the 2012 deficit target of 4.6 percent of GDP.
"Today's data might not be a reason for alarm, but there is definitely a need to monitor the situation closely," said Marek Gabris, analyst at CSOB bank.
The central state budget shortfall forms the biggest part of the by the European Commission monitored overall fiscal deficit.
"There can be an improvement in the inflow of the EU funds on the revenue side in the coming months, but the new government will have to watch expenditures to fill the budget," said Maria Valachyova, senior analyst at Slovenska Sporitelna.
The European Commission is expected to issue its opinion paper on state of Slovak public finances in the weeks to come.
Slovakia's government debt rose to 43.3 percent of the gross domestic product last year, from 41.1 percent in 2010, and remains well below the European Union average, the finance ministry data showed.
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