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Deficit at 8%, Debt at 44.2% of GDP in Q2

Ljubljana, 30 September (STA) - Slovenia's general government deficit amounted to EUR 742m or 8% of GDP in the second quarter of the year, up 0.3 percentage points from the year before, while debt stood at EUR 15.89bn or 44.2% of GDP, fresh data from the Statistics Office show.

The main reasons for the high budget shortfall are the EUR 243m state injection into the country's leading bank, NLB, in the first quarter, and a EUR 134m repayment to the railways operator Slovenske zeleznice in the second quarter.

These one-off transactions need to be deducted to reveal the real problems of Slovenia's public finances, Andrej Flajs, who is responsible for national accounts at the Statistics Office, told Friday's news conference, noting that the Finance Ministry had projected the deficit for this year to stand at 5.5% of GDP.

The forecast includes the one-off transfers related to the capital injections at NLB and flag carrier Adria Airways, the claim by Slovenske zeleznice, and some other transfers in the total amount of EUR 453m. Without these the deficit at the end of the year would be lower by 1.3% of GDP, Frajs said.

Commenting on the high deficit figures in the first half of the year (9.9% in Q1 and 8% in Q2), Flajs said that high borrowing was typical for the first two quarters, while the second half of the year was as a rule marked by repayment of loans, so he expected the deficit to be relatively low in the final two quarters.

Consolidated gross general government debt at the end of 2010 amounted to EUR 13.7bn or 38.8% of GDP, increased to EUR 16.4bn or 45.7% of GDP by the end of the first quarter of 2011, but then receded to EUR 15.9bn or 44.2% of GDP at the end of the second quarter.

On a positive note, Flajs pointed to a surplus in the balance of payments in transactions with the rest of the world. Despite the problems with the debt and deficit, the state is not taking on extra borrowing abroad.

The countries that are in a financial crisis today, have not only high internal deficit like Slovenia but also a very high external deficit, which is not the case in Slovenia, Flajs said, adding that this showed the country had a healthy parts of the economy that exported, and pointing to the importance of tourism.

Nevertheless, Flajs warned that Slovenia's current fiscal picture was not good, pinpointing the slow-down in state revenue growth as a result of slower economic growth. The total general government revenue rose by 5.5% y/y in the first quarter, but only increased by 2.4% in the second quarter.

A positive development is that despite the crisis, expenditure has so far not decreased in nominal terms, Flajs said, noting that the slower the economic growth, the harder the fiscal recovery would be. He projected that the general government deficit would drop to around 3% of GDP in case of a somewhat more robust growth.

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