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Govt Deficit Balloons Due to NLB Cap Raising, Finances Improving

Ljubljana, 30 June (STA) - The general government deficit swelled in the first quarter of 2011 to 10.3% of GDP due to the EUR 243m the state injected into Slovenia's biggest bank, NLB, the Statistics Office said on Thursday. Despite this, statisticians say Slovenia's public finances are actually improving.

The first-quarter deficit was at EUR 879m, which is higher than in the same period a year ago, when it stood at EUR 722m or 8.8% of GDP.

But without the capital raising at NLB, the deficit would have stood at 7.5% of GDP, which is 1.3 points better than last year, Andrej Flajs of the Statistics Office told the press.

The state provided EUR 243m of the EUR 250m capital injection carried out in March as other owners shied away.

The recapitalisation prompted the Statistics Office to raise its forecast for the yearly budget deficit to 5.5% GDP from 4.8%.

More one-off transfers are expected this year, with the state pledging EUR 134m in repayment to the railways operator Slovenske zeleznice (SZ) and approving a EUR 49.5m bail-out for flag carrier Adria Airways.

This means "that we will have around 1.2 percentage points of one-off transactions that will be included in the deficit," said Flajs.

In spite of this, the office said that the state of Slovenia's public finances was actually improving.

"This is the second consecutive quarter when revenue growth has outstripped that of expenditures," Flajs noted.

Excluding the NLB capital injection, state expenditure was up 2.2% in the first quarter over last year, whereas revenues were up 5.2%.

The biggest jump in revenues year-on-year was seen in taxes from production (4.7%), followed closely by taxes on income and assets (4.6%).

Moreover, income from the EU budget soared 67.4% in nominal terms over the same period last year as fund phasing improved.

On the spending side, the biggest increase was registered in interest payments (up 11.6%) and welfare spending (up 5.2%).

Spending on goods and services were up 1.7%, while labour spending increased by 1.5%.

There was a significant drop in gross capital formations by the state, which fell 8.7% to EUR 386m.

The consolidated gross national debt stood at EUR 16.385bn after the end of the first quarter of the year, which amounts to 45.2% of GDP, the Statistics Office added.

This is an increase of 7.1 percentage points since the end of last year, when it stood at EUR 13.704bn.

Flajs pointed out that the government generally takes out most of its debt in the first quarter.

By the end of the year, the debt is expected to drop to EUR 15.914bn or 43.3% of GDP.

Flajs explained that the growth in debt is a result of relatively timid economic growth and an unfavourable ratio between export and import prices.

This has resulted in an increase in the trade deficit, which stood at EUR 166m or 2% of GDP in the first quarter, compared to only EUR 45m or 0.5% of GDP in the same period of 2010.

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