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August 26, 2018 12:00 am | FILED UNDER: politics

Government Should Aim For Balanced Budget: Analysts

By ČTK Czech Finance Minister Alena Schillerova

Prague, Aug 26 (CTK) – Analysts welcome the intention of Czech Finance Minister Alena Schillerova to reduce the planned deficit of the 2019 state budget, however, with the current economic growth, the government should be attempting a balanced budget, they said.

 

Analysts warned about a rise in expenditures which could deepen the budget deficit, and they consider it a wasted opportunity that the state is not lowering the public debt to gross domestic product ratio at the time of economic prosperity.

 

Schillerova said today in the Questions of Vaclav Moravec discussion programme on public Czech Television that she would submit a 2019 draft state budget with a Kc40bn deficit. The Finance Ministry has been envisaging a Kc50bn deficit until now.

 

The lower deficit is possible thanks to the expected wage rise and with that higher taxes and insurance payments, Schillerova said.

 

Schillerova expects an increase in tax collection and insurance payments without planning measures securing it, Komercni banka analyst Viktor Zeisel said.

 

Schillerova counts on economic growth, especially rising wages and consumption; but expenditures on salaries of state employees, pensions and earlier approved investments pose a risk to the budget plan, he added.

 

This year, the state budget will end in a deficit lower than the planned Kc50bn; however, next year will bring a bigger deficit because of the decelerating economy and fast-growing current and capital expenditures, Zeisel said.

 

Over the past few years, the actual deficits of the state budget have been significantly different from the plans, BH Securities company chief economist Stepan Krecek said.

 

Provided the current economic growth rate is maintained in 2019, it is possible that the budget will end up better than it is currently planned, Krecek said.

 

Apart from a balanced budget, the government’s goal at the time of economic prosperity should be lowering the debt-to-GDP ratio, Cyrrus company chief economist Lukas Kovanda said.

 

The ratio is currently about 10 percentage points higher than the levels around 25 percent reported before the financial crisis in 2008, Kovanda said.

 

The government presented its 2019 draft budget with a Kc50bn deficit in June. Revenues were projected at Kc1,432bn, Kc117.1bn more compared to the 2018 budget, and expenditures were envisaged at Kc1,482bn.

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