Rising state debt calls for a lean state administration

The consolidation of public finances should be a priority for the new government. The numbers are sounding the alarm. It may seem that things cannot sink any lower… Or can they?

The state debt looks dismal

The value of the gross debt as of 31 December 2022 reached a level of 57.8% of GDP. As the portal Trend.sk reports, without the adoption of consolidation measures the debt could exceed 60 percent of GDP as early as 2025.

The long-term forecast of gross debt from the Ministry of Finance shows that without consolidation the country’s gross indebtedness will reach 94.3% of GDP in 2040.

Slovakia’s state budget has long been in the negative. According to estimates by the Office of the Council for Budget Responsibility, the general government deficit in 2023 could reach a level of 6.767 billion euros (5.5% of GDP).

How do things look at our neighbours’?

Neighbouring Czechia decided to deal with its historically highest state budget deficit (approximately 295 billion crowns, which represents about 12 billion euros) in its own way. By slimming down the state administration, which the government has in its policy statement. A detailed analysis was to be completed by the end of this year. So a question arises for us: Will this be needed in our country too?

There are too many people in the state and they are missing in industry

Slovakia has too many paid officials. Yet while in the state administration we observe an oversized workforce, in industry we are short of tens of thousands of people. By 2025 we will need 70 thousand new employees. For example, more than 4,500 assembly workers/operators in engineering production, or approximately 2,200 metal machinists. We need tens of thousands of further employees in sectors directly linked to industry, e.g. in truck transport or logistics. The situation will escalate. The bloated state apparatus is becoming a „devourer” of our GDP, which is generated mainly by industry. It is high time to support enterprises instead of the state feeding, in many cases, superfluous officials.

We call for the consolidation of finances

Despite the fact that we regularly put hundreds of millions of euros into digitalisation, the number of public administration employees has grown by 10 thousand. This indicates the state’s failure to find reserves in the performance of public administration. The salaries of state employees are one of the most significant causes of the drain on public finances. In our opinion on the general government budget for 2023 to 2025 we pointed out that wage costs will rise by 1.5 billion euros (15%) compared with the last budget. We believe that the new government will begin to genuinely address this problem and turn promises into deeds. Let us bear in mind that we have few human resources and they are poorly distributed. Even if we were to reduce the number of officials, they would certainly find employment in other sectors – engineering, construction or transport.