Slovak draft 2013 budget shows 2.9% deficit

(BRATISLAVA) - The Slovak left-of-centre government aims to cut the public deficit heavily next year to 2.9 percent of output, a draft budget showed on Wednesday.

The government of Prime Minister Robert Fico approved the draft budget for 2013, setting a target of hacking the deficit back from 4.6 percent forecast for this year.

The objective is below the European Union ceiling of 3.0 percent and would put Slovakia, a member of the eurozone, in better shape on this score than many other countries in the 17-member eurozone and also in the European Union.

"This budget ensures that Slovakia will stay in the core of the European Union as we pledged to cut the deficit to 2.94 percent of GDP," Fico told journalists.

"We plan to continue cutting the deficit to 2.4 percent in 2014 and to 1.9 percent in 2015 - in line with the EU's fiscal compact that we will ratify in upcoming days," Finance Minister Peter Kazimir added.

The draft, pegging a budget gap at three billion euros ($3.86 billion), is expected to pass smoothly in the 150-seat parliament where Fico's social democrats command an 83-seat majority.

State spending will total 17.24 billion euros ($22.2 billion) and revenue 14.18 billion euros.

The budget is predicated on economic growth of 2.1 percent in 2013, down from an expected 2.5 percent this year.

It includes a 530-million-euro reserve to be used to offset revenue shortfall should the economy, driven by exports of cars and electronics mostly to Germany, slow down.

Slovakia is home to several global electronics plants and car makers including Germany's Volkswagen, South Korean Kia and France's PSA Peugeot Citroen, whose production is expected to soar this year.

In a bid to consolidate the public finance gap, the government, which took office in April, scrapped the country's trademark 19-percent personal and corporate flat tax, replacing it with higher taxes on the rich and corporations from 2013.

Next year, the corporate tax rate will be raised to 23 percent, while personal income tax will jump to 25 percent for individuals earning more than 3,300 euros ($4,300) gross a month.

All politicians including the president, lawmakers and ministers will also pay an extra five-percent tax on their salaries.

Fico's austerity package also includes a higher levy on banks and biggest corporations and changes to the pension system.

The nation of 5.4 million joined the European Union in 2004 and adopted the euro in 2009 during Fico's first stint as prime minister.