A high weight on measures burdening activity and investments means a lower decrease in future deficits and therefore extends the period of consolidation. In addition, next year, as a result of the measures taken, disposable incomes of families, including individuals, will decrease by an average of 2.1%. The Council for Budget Responsibility (RRZ) informed about this on Monday.
- The measures adopted in 2024 will burden activity and prolong the consolidation of deficits.
- Household disposable incomes will fall by an average of 2.1% as a result of the measures.
- Retired families without work income will experience the lowest decrease in income.
- The measures will improve the general government balance by 1.1% of GDP by 2026.
- Public finance debt will reach 73.4% of GDP by 2029.
“The annual impact on an individual without children will be 247 euros, the income of a 2+1 family will be reduced by 742 euros and a 2+2 family by 858 euros. Families of working age with working income will be most affected, at least families of senior citizens (reduction of 65 euros) and other families without work income. The increase in health levies will contribute the most to the immediate reduction of the disposable income of families, with a similar degree of changes regarding the payment of self-employed person levies (SZČO) and the increase in income tax rates,” the experts said.
The council concluded that, according to official tax data, families in which at least one member is self-employed will be particularly affected in terms of the form of activity. However, the percentage decrease in the case of SZČO distorts the fact that their declared income is often significantly lower than their real economic positionunderlined RRZ.
In the next year, it predicts a lower growth of the economy by 0.4 percentage points compared to the expectation without consolidation. The RRZ further estimates that the package of measures could lead to an improvement of the public administration balance in 2026 by 1.1% of gross domestic product (GDP), the overall positive impact of the package on the deficit may remain around one percent of GDP in the following years. According to experts, its contribution to reducing the deficit will also be reflected in the slowdown in debt growth, which, however, remains on an unsustainable growth trajectory. In 2024, the debt reached 59.7% of GDP, and by 2029, even with all measures taken, it should rise to the level of 73.4% of GDP.
“The package also improves the long-term sustainability of public finances, which is currently well below the high-risk zone. But while the package alone may improve it by up to 0.9% of GDP, together with other impacts, including the new spending measures adopted with the budget, it will the resulting impact on long-term sustainability reduced to only around 0.3% of GDP,” added RRZ.
