The cabinet has adopted the budget framework for the next two years, envisaging a spending cut as a result of a fall in tax revenues. The budget deficit is forecast at 1.3% and 1.2% of GDP for 2006 and 2007 respectively, Finance Minister Andrej Bajuk said.
The plan that was confirmed by the cabinet at Friday's session will see budget expenditure stand at 26.3% of GDP in 2006 and 25.9% of GDP in 2007, a drop on earlier estimates.
The document adopted today will act as the groundwork for the budgets for 2006 and 2007 that the government will draw up after it returns from the summer break.
According to Bajuk, the cut in expenditure is a result of the gradual phasing out of payroll tax. The tax will be cut by 20% in 2006, 20% in 2007 and 30% in 2008, before being fully phased out in 2009.
The cut in tax revenue has forced the government to cut spending compared to earlier plans. Expenditures for 2006 are planned at SIT 1,819bn (EUR 7.59bn).
Bajuk pointed out that there was still a lot of uncertainty regarding the 2007 budget because the EU has not yet adopted its spending plan, meaning Slovenia does not know how much money it can expect to get.
The finance minister is confident that the budget framework for the next two years will allow Slovenia to fulfil its macro-economic goals, including the adoption of the euro.
Moreover, the move to phase out payroll tax should help Slovenia be more competitive.
This will be coupled with the downsizing of the public administration, with at least 1% of the jobs expected to be cut.
According to Bajuk, the government plans to make the biggest spending increases in areas crucial for development, including technology, science and competitiveness.
Moreover, more money is to be set aside in the coming years for reducing the developmental gap between the regions, improvement of the transport infrastructure and health.
On the other hand, funds are to be cut for justice, the national Motorway Company and the Ministry of Labour, Family and Social Affairs, Bajuk said.
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