(Adds quotes from PM, analyst)
By Peter Laca
BRATISLAVA, Nov 28 (Reuters) - Slovak lawmakers approved a
bigger 2009 budget deficit on Friday than originally planned as
the global financial crisis hits the country's finances in the
first year of its euro zone membership.
The budget sets the public finance deficit target at 2.1
percent of gross domestic product, compared an originally
proposed 1.7 percent, due to slower economic growth.
"This is a budget with which we are protecting Slovakia and
its citizens from the impact of the global economic crisis,"
Prime Minister Robert Fico said after the vote.
The 2009 budget gap target is below the formal ceiling of
2.3 percent set for 2008, which is the expected deficit this
year after the government said it would not meet the 2.0 percent
limit that it adopted in the spring to secure euro adoption.
Analysts said Slovakia, which will remain one of the fastest
growing economies in the European Union, could make a deeper
deficit cut. Some economists saw risks that revenues may fall
short of projection and lead to even a bigger gap.
The budget was approved by 82 deputies in the 150-seat
assembly, with 56 voting against the bill and 1 abstaining. The
rest of the MPs did not take part in the vote.
Budget approval came one day after Standard & Poor's raised
its sovereign ratings on Slovakia to "A+" from "A", saying the
continued improvement in the country's economic competitiveness
would be supported by its 2009 entry into the euro zone.
Slovakia has been largely shielded from the direct impact of
the crisis and the EU has singled it out as one of the few
economies that will ride out the crisis relatively well.
But the small and open economy, which depends heavily on
exports of cars and electronics goods, will be hurt by consumer
spending cuts in its main western markets.
BUDGET RISKS
The government cut its 2009 GDP growth forecast to 4.6
percent from an original 6.5 percent after the global financial
crisis escalated in September.
It has agreed the state will not cut expenditure to
compensate for the resulting lower revenues but rather widen the
deficit, partly to fulfil pledges of bigger welfare spending.
Central bank Governor, Ivan Sramko, has said a wider deficit
was acceptable if it helped the economy better withstand the
global financial crisis.
However, Sramko has cautioned that revenues may be lower
than planned because the cabinet projected one-off income from
changes in the pension system.
The government expects some 150,000 people to cancel their
private pension accounts and return to the pay-as-you-go system.
This should cut the gap in the state-run pension scheme and
free money in the state budget, which the cabinet already
allocated for spending next year.
Apart from the one-off income, analysts also saw risks of
even slower GDP growth, which could reduce budget revenues.
"If the economic development is worse, then I am worried
that the government will not be able to adjust its expenditure
to meet the already increased deficit (target)," said Juraj
Valachy, an analyst at Tatra Banka in Bratislava.
(Additional reporting by Martin Santa; Editing by Ruth
Pitchford)
