This year’s state budget deficit should not exceed CZK 330 billion after the planned amendment. Transport Minister Martin Kupka (ODS) said. Economists interviewed agree that it would be a success, but the reality may differ.

“I am convinced it should not exceed the CZK 330 billion,” Kupka said.

Now the budget is approved with a deficit of 280 billion crowns. Finance Minister Zbyněk Stanjura (ODS) is expected to present the amendment to the government at its next meeting. It is to consider the impact of the war in Ukraine and the associated additional spending as well as high inflation.

According to Michal Skorepa, chief economist at Česká spořitelna, the CZK 330 billion deficit could be considered a success under the circumstances.

“However, the second half of the year is associated with great uncertainty, especially on the budget expenditure side. The sharp increases in household spending on energy and food may push the government, for political reasons, to further support measures beyond those discussed so far,” the economist said, adding that in such a case, the state’s spending would be significantly higher than the current estimate.

Jakub Seidler, the chief economist at the Czech Banking Association, pointed out that the data so far for the budget development in the first half of the year suggested that the deficit would reach CZK 350 billion. The figure proposed by Kupka may not be unrealistic at first sight.

Křeček: Government should plan for cuts

According to BHS chief economist Štěpán Křeček, in these challenging times, it is justified if the state budget deficit will be at a higher level. “If we deviate from the planned deficit of CZK 280 billion this year within the range of CZK 50 billion, it will be a good result,” he said.

However, the government should come up with a realistic plan on how it wants to reduce the deficit in the medium term. “The current rate of debt of our country is not sustainable in the long term, and we can only afford it for a few more years,” Křeček warned.

Significant deficits in the coming years

The finance ministry projected a deficit of CZK 295 billion in the preliminary draft of the state budget for next year, which the government discussed in early June. The ministry set the deficit at around CZK 297 billion for 2024 and CZK 298 billion for 2025.

In the history of the Czech Republic, the state budget has ended in surplus only five times: in 1993-1995, in 2016 (+ CZK 61.77 billion) under Bohuslav Sobotka (ČSSD) and 2018 (+2.9 billion) under Andrej Babiš (ANO).

Under Babiš, the Czech Republic had the highest deficits in history. The highest ever was last year. That year, the state ended with a shortage of CZK 419.7 billion. The year before, it was CZK 367.4 billion. However, the coronavirus pandemic strongly affected the balance of both years.

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