The public finance deficit to fall to 4.5 percent of GDP this year, ministry estimates

Milan Malíček

The public finance deficit is expected to fall to 4.5 percent of gross domestic product (GDP) from 5.9 percent last year. According to the finance ministry’s estimates in its new April forecast, the debt should continue to fall in the following years to 2.7 percent of GDP in 2025.

According to the finance ministry’s forecast, the public debt should rise to 42.7 percent of GDP by the end of this year, up from 41.9 percent last year. The debt is expected to increase by 45.4 percent by 2025. The estimate reflects the receding epidemic, the effects of Russia’s aggression against Ukraine, the related humanitarian crisis, and aid to households and businesses affected by substantial price increases.

EU rules usually require a deficit below three percent of GDP and debt below 60 percent of GDP. But the European Commission suspended the rules in March last year to support economies hit by the anti-pandemic measures and announced their return last year until early 2023.

Regarding the consolidation of public finances, Finance Minister Zbyněk Stanjura (ODS) said on Friday at a meeting with journalists that he does not want to resign from it.

“However, the figures in the debt financing strategy, which envisage a reduction of the budget deficit to CZK 270 billion next year and CZK 250 billion the year after, are now quite ambitious given the current situation. On the other hand, if it were not for the war in Ukraine, I would certainly want even lower deficits,” he said.

The budget for this year is approved with a deficit of 280 billion crowns. Earlier, Stanjura said that, given the current situation, he did not know whether it would be possible to keep this year’s budget deficit below CZK 300 billion.

The balance of public finances is calculated from the difference between revenues and expenditures of ministries and other state agencies, cities and municipalities, selected contributory organizations, state and additional extra-budgetary funds and companies, public universities, public research institutes, health insurance companies, associations and unions of health insurance companies and the Centre for Interstate Reimbursement.