October 10, 2018 / 11:32 AM / 9 months ago

UPDATE 1-Slovak government approves 2019 budget with faster deficit reduction

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BRATISLAVA, Oct 10 (Reuters) - Slovakia’s government approved a 2019 budget on Wednesday that aims for a faster reduction in the fiscal deficit than initially planned due to stronger economic prospects and higher tax collection.

The three-party ruling coalition, led by leftist Smer, plans to cut the deficit to 0.1 percent of gross domestic product next year, the lowest level ever, down from an estimated gap of 0.6 percent this year.

The approved budget plans see a balanced budget in 2020 and then a first-ever surplus in 2021, coming at a time of fast economic growth thanks to an expanding car sector in the euro zone country and a fall in unemployment to new lows.

Last month, the finance ministry said the state would see higher tax collection than originally forecast, allowing for a 10 percent wage hike for public sector workers and the introduction of benefits including free lunches for elementary school children.

The draft budget sees a public finance gap of 2.1 billion euros next year while the public debt is expected to fall to 47.3 percent of GDP in 2019, from 48.7 percent this year. The euro zone average was 86.7 percent last year.

The plans are based on expected economic growth of 4.5 percent in 2019 — more than double the European Union and euro zone average.

Slovakia is home to three automotive plants and a fourth one is expected to come online later this year, helping growth and cementing the country’s position as the world’s biggest per-capita car maker. (Reporting by Tatiana Jancarikova, Editing by Robert Muller, Richard Balmforth)

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