Prime Minister Janez Jansa and Finance Minister Andrej Bajuk were upbeat about Slovenia's prospects as they presented the amendments to the 2007-2008 budget memorandum and the 2008 budget bill to parliament on Monday.
The amendments to the 2007 budget project revenues of SIT 1,860bn (EUR 7.76bn) and expenditures of SIT 1,937bn (EUR 8.08bn), which puts the deficit at 1.01% of GDP.
Compared to the estimates for the realisation of the 2006 budget, revenues and expenditures will be lower by 0.5 and 0.6 percentage points respectively.
In 2008 the revenues are projected to top 1,950bn (EUR 8.15bn) with expenditures at SIT 2,024bn (EUR 8.46bn) and a budget deficit of 0.91% of GDP.
According to Jansa, the government would work towards sustainable economic growth, greater employment and better welfare, whereby the main mid-term goal in public finances is the reduction of the budget deficit to zero by 2011.
The budgets for 2007 and 2008 are realistically developmental, he said. They include measures to improve the adaptability and flexibility of the economy, boost budget growth and employment and make the welfare state cheaper and more efficient.
"Despite politically-motivated resistance against the necessary reforms, the government has no intention of renouncing the commitment for a society that is more developed and socially-just based on realistic foundations," Jansa told the MPs.
Jansa pointed out that the proposed tax reforms would significantly reduce the burden on the economy, which is why expenditures as well as the budget deficit are being reduced. The economy is in good shape, which gives us more room for the reduction of the structural deficit, he said.
According to Jansa, the shortfall from the tax reform measures, which are being carried out to lift the tax burden on the economy, would be offset with savings measures, the removal of red tape and a more prudent use of budget funds.
On the other hand, the government will continue to increase spending on research and development, higher education, active employment policies and scholarships, Jansa added.
Finance Minister Bajuk meanwhile stressed that the budgets for the next two years preserve macroeconomic stability in a period crucial due to the introduction of the euro.
He pointed out that the budget memorandum for 2007 and 2008 has been drawn up based on the national development strategy and the government's commitment to economic reforms.
Important steps towards reducing tax burdens were made in tax reform measures last year, but even more important measures will be introduced with the tax reform package that is already in parliament, he said.
According to Bajuk, the 2007 budget as well as the budgets of municipalities and the Pension and Disability Insurance Institute (ZPIZ) and the Health Insurance Institute (ZZZS) would reduce the general government deficit by 25% compared to the original budget projections. In 2008 it will be reduced even further, to 0.8% of GDP.
In addition, the government's tax reform package will reduce taxes for the citizens and companies, which would provide a boost to economic growth, increase investment and employment and improve the wellbeing of all income groups.
The budget for 2007 increases funding for the economy by 2.1% compared to the original budget act. The figure will rise by another 22.7% in 2008, mostly through higher spending on competitiveness and the promotion of foreign direct investment and small enterprises.
A novelty that Bajuk pointed out is that the funding of municipalities will no longer depend on income tax. Instead, there will be a fixed sum laid down in each budget so they will know exactly how much they are entitled to.
The presentation of the budget formally kicked off the period for the filing of amendments: MPs, deputy groups and working bodies have until 19 October to submit amendments.
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