Stability programme of Slovenia, 2006-2009 - Main contents

EN

Official Journal of the European Union

C 71/9

On 27 February 2007 the Council examined the first stability programme of Slovenia, which covers the period 2006 to 2009.

The macroeconomic scenario underlying the programme envisages that real GDP will grow steadily at above 4 % over the programme period. Assessed against currently available information, this scenario appears to be based on plausible growth assumptions. The programme's projections for inflation also appear realistic.

For 2006, the general government deficit is estimated at 1,6 % of GDP in the Commission services' autumn 2006 forecast, against a target of 1,7 % of GDP set in the December 2005 update of the convergence programme. The 2006 estimated outturn, based on more recent figures, of 1,2 % GDP is lower compared to 2005.

The programme's budgetary strategy is geared to achieving the medium-term objective (MTO) for the budgetary position as meant in the Stability and Growth Pact by 2009 through a back-loaded consolidation. Reflecting the ongoing tax reform and a number of cost-saving expenditure measures, revenues and expenditure as a percentage of GDP fall significantly throughout the programme period. Until 2008, when the respective ratios decrease in broadly equal measure, the general government deficit is planned to linger at around 1,5 % of GDP. In 2009, the deficit declines to 1,0 % as expenditure reduction outweighs the revenue loss. The primary balance initially deteriorates from 0,1 % of GDP in 2006 to -0,3 % of GDP in 2008 before improving to 0,3 % of GDP in 2009. Compared with the last update of the convergence programme, the stability programme postpones the target of achieving a nominal deficit of 1 % of GDP by one year against a more favourable macroeconomic scenario.

Over the programme period, the structural balance (i.e. the cyclically-adjusted balance net of one-off and other temporary measures) calculated according to the commonly agreed methodology is planned to improve by around

% of GDP. As in the December 2005 update of the convergence programme, the medium-term objective (MTO) for the budgetary position presented in the stability programme is a structural deficit of 1 % of GDP to be achieved by 2009, one year later than in the previous programme. The delay is attributed in the programme to a major railway project with an estimated cost of 0,4 % of GDP in 2007, 0,5 % of GDP in 2008 and 0,2 % of GDP in 2009; as well as some expenditure of a temporary nature. Since the MTO is more demanding than the minimum benchmark (estimated at a deficit of around 1

% of GDP), reaching it should fulfil the aim of providing a safety margin against the occurrence of an excessive deficit. The MTO lies within the range indicated for euro-area and ERM II Member States in the Stability and Growth Pact and the code of conduct and adequately reflects the debt ratio and average potential growth in the long term.

The risks to the budgetary projections in the programme appear broadly balanced but the budgetary outcome could be worse than projected in 2009. On the one hand, the assumptions on growth and tax revenues seem plausible. Furthermore, Slovenia has established a track...