Slovak government plans soft drinks tax as part of EUR 1.4 bln deficit reduction

Slovakia's government will tax sweetened soft drinks and raise taxes on tobacco-related products as part of a 1.4 billion euro ($1.52 billion) budget consolidation package for 2025, Prime Minister Robert Fico said on Monday. The central European state faces the euro zone's biggest budget deficit, forecast at over 6% of GDP in 2024, as spending has jumped amid energy price rises and higher pension obligations.

Slovakia's government will tax sweetened soft drinks and raise taxes on tobacco-related products as part of a 1.4 billion euro ($1.52 billion) budget consolidation package for 2025, Prime Minister Robert Fico said on Monday.

The central European state faces the euro zone's biggest budget deficit, forecast at over 6% of GDP in 2024, as spending has jumped amid energy price rises and higher pension obligations. The plans indicate a possible acceleration of deficit reduction by Fico's leftist-nationalist government, which took power late last year vowing a gradual process to protect the economy and the living standards of the 5.4 million population.

Finance Minister Ladislav Kamencky said the deficit would be lowered to below 3% of GDP, the ceiling set in European Union rules, with next year's tax increases and spending cuts worth 1% of GDP - higher than previously mooted plans for 0.5% per year. Further savings and income rises aimed at 2026 are worth 1.5 billion euros, he said.

The taxes on sweetened drinks and tobacco-related products will be worth around 100 million euros next year and 243 million euros in 2026, just a small portion of the necessary amount. Fico also said the ruling coalition would discuss job cuts in the state sector as part of its plans, but added he was against raising the high-yielding value-added-tax.

Slovakia has faced pressure to begin putting debt levels on a downward path. The International Monetary Fund has forecast government debt will grow to 59.3% of gross domestic product in 2024, from an estimated 57.9% last year, before climbing past 60% in the coming years.

In early December, Fitch ratings agency cut Slovakia's debt rating by one notch to 'A-' with a stable outlook, citing deteriorating public finances and an unclear consolidation path. ($1 = 0.9238 euros)

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