Long-Term Sustainability

In the upcoming decades, Slovakia will face rising costs stemming from demographic developments, which will expose public finances to an ever-increasing pressure[1]. One of the main tasks of the Council for Budget Responsibility (“CBR”) laid down in the Fiscal Responsibility Act[2], is to publish the Report on the Long-term Sustainability of Public Finances. The report evaluates whether public policies, in conjunction with the assumed demographic and macroeconomic development, have been set up in a sustainable manner from the perspective of public finances.

The long-term sustainability of public finances was not achieved in 2018. The long-term sustainability indicator reached 1.32 % of GDP, thus moving away from the low risk threshold for long-term sustainability.

The long-term sustainability of public finances remained unchanged in 2015 and the long-term sustainability indicator reached 1.4 % of GDP.

This paper describes the construction of the baseline scenario for next 50 years.

The paper sets out a DSGE model designed and calibrated to match key stylized facts about the Slovak economy.

This discussion paper provides an overview of the analytical indicators used to evaluate fiscal policy in the short, medium and long term.