Report on the Long-term Sustainability of Public Finances (April 2018)

The long-term sustainability indicator reached 1.1 % of GDP in 2017. In order to keep the general government debt below the debt ceiling (50 % of GDP) over the next fifty years, it is necessary to adopt (beyond the framework of baseline scenario assumptions) additional measures totalling some 1.1 % of GDP in the medium term. Sustainability worsened by 0.3 % of GDP year-on-year. The Government has not taken full advantage of the favourable economic developments in 2017 for improving the fiscal position. The adjusted budget balance improved by 0.2 % of GDP year-on-year, which is 0.2 % of GDP less than the expectations under the no-policy change scenario using the figures for 2016. As regards other measures, the long-term sustainability has worsened year-on-year also due to the introduction of the temporary minimum pension indexation amount. The baseline scenario for the development of general government revenues and expenditures based on 2017 assumes that, by 2021, the budget balance would automatically improve by 0.5 % of GDP without further measures of the government. The deficit will be declining in particular as a result of savings in interest payments and expenditures in the pension systems due to parametric changes made in the previous years. In order to prevent the long-term sustainability from worsening in comparison with 2017, these savings must inevitably be fully reflected in a better budget balance. Reaching the trajectory of long-term sustainability requires a structural surplus between 0.3 and 0.4 % of GDP by 2021, and this would have to be taken into account when setting the medium-term budgetary objectives.

 
Download