Evaluation of compliance with the balanced budget rule in 2018

According to the CBR, the general government’s structural deficit stood at 1.24 % of GDP in 2018; it means that the balanced budget (a structural deficit not exceeding 0.5 % of GDP ) has not been achieved so far. Following an assessment of the path towards the balanced budget, a significant deviation with the need to trigger the correction mechanism occurred in 2018.

The Ministry’s and the CBR’s evaluations differ in their overall conclusions. According to the Ministry’s evaluation, there was only an insignificant deviation from the balanced budget rule, therefore, it did not propose to trigger the correction mechanism.

The achievement of the budgetary objective in 2019 would mean that the balanced budget rule was complied with. Given the identified significant deviation, the government should approve a binding correction plan that would enable meeting the medium-term budgetary objective of having a structural deficit of 0.5 % of GDP within the shortest time possible. The need to adopt correction measures is also underlined by significant risks arising from the development in the general government balance in 2019. If the correction measures do not result in meeting the medium-term budgetary objective in 2019, the MTO should be met in 2020 at the latest. In order to meet this objective, a nominal year-on-year growth rate of adjusted expenditures should not exceed 5.1 % on average for both years.