March 13, 2019 / 3:00 PM / 7 days ago

Slovenia set to run surplus, reduce debt: finance minister

LJUBLJANA (Reuters) - Slovenia plans to continue to run budgets at a surplus in the coming years, with a surplus of 0.6 percent of gross domestic product forecast this year after 0.8 percent in 2018, Finance Minister Andrej Bertoncelj told Reuters on Wednesday.

FILE PHOTO: Andrej Bertoncelj, Slovenian finance minister candidate, speaks at the parliament in Ljubljana, Slovenia September 6, 2018. REUTERS/Borut Zivulovic

He said public debt was expected to fall to below 60 percent of GDP “in two to three years” after reaching some 66 percent this year, down from 70 percent in 2018.

“It is of key importance that we run a budget surplus ... and reduce public debt,” Bertoncelj said in his first international interview since he took the post in September, when the minority center-left government of Prime Minister Marjan Sarec was sworn in following June’s election.

He said the government planned to reduce taxes on wages and personal income, which are above the euro zone average, which should help boost household spending, and at the same time increase tax on corporate profit to ensure a budget surplus.

The tax on corporate profit stands at 19 percent but is likely to increase to 20 percent next year and possibly to 22 percent by 2022. However, companies that invest in research and development will be able to reduce the tax rate to 5 percent.

Bertoncelj believes Slovenia will remain competitive compared with other euro zone states even after the corporate tax hike since it is likely to remain below the euro zone average.

Bertoncelj said he was aware that the economic growth of Slovenia’s trading partners was slowing down but added “we cannot talk about crisis as there is a big difference between economic slowdown and crisis”.

Export-oriented Slovenia, which managed to narrowly avoid an international bailout for its banks in 2013, increased its exports by 13.7 percent year-on-year in January after they rose by 9.2 percent in the whole of 2018.

Its main export partners are Germany, Italy, Croatia, Austria and France while main exports include cars, car parts, pharmaceutical products and household appliances.

Despite the headwinds, Bertoncelj said most forecasts show Slovenia’s economy would expand by some 3.4 percent this year, which is “a solid growth” versus 4.5 percent in 2018.

He said one of the government’s main tasks is to improve the efficiency of the public sector, which should help toward higher economic growth.

Bertoncelj said credit rating agencies might “soon” improve ratings for Slovenia. At present Slovenia holds a rating of A+ by S&P, A- by Fitch and Baa1 by Moody’s.

Earlier, Labour Minister Ksenija Klampfer outlined a plan to gradually increase the retirement age to 67 over the next 15 years from 65 at present to ease the burden of the rapidly aging population on the budget.

Bertoncelj also said the country could issue another bond to refinance its debt this year, which could be a green bond, after issuing a 1.5 billion euro 10-year bond in January but gave no further details.

Reporting by Marja Novak; Editing by Alison Williams

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