BRATISLAVA, Aug. 18 (Xinhua) -- Slovakia has exhausted its fiscal space as public debt continues to rise, leaving the country more vulnerable to future crises, the Council for Budget Responsibility (RRZ) said in a new report.
Public debt exceeds 60 percent of gross domestic product (GDP), above the RRZ's estimated safe level of below 50 percent. Without further measures, it is projected to reach 75 percent of GDP by the end of this decade, the report said.
The exhaustion of fiscal space does not mean Slovakia faces an immediate threat of bankruptcy. However, another crisis could expose the country to higher borrowing costs and force it to adopt rapid, far-reaching fiscal consolidation measures at a time when it needs to stabilize the economy, the report added.
In the worst-case scenario, Slovakia could lose access to financing its needs on acceptable terms and will be reliant on external assistance, according to the report.
The report also examined major systemic shocks alongside long-term structural pressures and risks, such as a loss of competitiveness, climate change, investment debt, uncertainties about the future of the automotive industry in Europe, and the gradual reduction in inflows of EU funds. These risks may occur simultaneously and reinforce one another.
"The key task should therefore be to halt the growth of debt and restore confidence that Slovakia has its public finances under control," RRZ chairman Jan Toth said. "Subsequently, fiscal space must be gradually created to manage potential future risks," he added. ■