William Malcolm

Czech Deficit Hits 279.4 Billion Crowns In July

At the end of July, the state budget deficit rose to 279.4 billion crowns from 265.1 billion crowns in June. The Ministry of Finance (MF) informed about it in a press release. This is the worst July result since the establishment of the Czech Republic. Last year, at the end of July, the deficit was CZK 205.1 billion.

At the end of July, total budget revenues increased by CZK 19.3 billion year-on-year to CZK 836.3 billion. Tax revenues, including social security premiums, increased by CZK 32.4 billion year-on-year to CZK 721.9 billion. At the end of July, total budget expenditures rose by 93.6 billion year on year to 1.1 trillion crowns.

“Anti-epidemic measures in the first quarter of this year, which reduced economic activity, had a negative impact on state budget tax revenues. to help the affected sectors of the economy, the social and health care system, these are the main causes of the year – on – year decline in the state budget, “said the Ministry of Finance.

The ministry also informed that 404.3 billion crowns went from the state budget to fight the coronavirus pandemic from last March to the end of July this year. Direct measures, for example in the form of compensatory bonuses, Antivirus programs, and other programs, required CZK 263.7 billion. The deferral of tax advances was calculated by the Office at CZK 31.4 billion and health care expenditures in the form of the purchase of protective equipment, rewards for health professionals, or debt relief for selected hospitals at CZK 109.2 billion. From January to July this year, the Ministry of Finance estimated the total aid from the budget at 186.2 billion crowns.

“The pace of deepening of this deficit has slowed significantly in the last two months, due to the loosening of pandemic restrictions and the observed economic recovery. We continue to think that the state’s economy for the whole year will end with a lower deficit than the approved 500 billion crowns. crowns, “said Martin Gürtler, an economist at Komerční banka.

According to Raiffeisenbank analyst Vít Hradil, this year’s development so far confirms that the approved deficit of CZK 500 billion will not be needed. “Assuming that autumn does not bring another crushing pandemic wave associated with forced economic closures, the state of the revenue and expenditure side of the state treasury should further improve. We still assume that this year’s final deficit will reach a maximum of 400 billion crowns,” he said.

At the end of July, the collection of value added tax increased by CZK 5.9 billion year-on-year to CZK 164.3 billion. The collection of corporate income tax increased by CZK 26.4 billion year-on-year to CZK 76.5 billion.

On the contrary, the collection of personal income tax fell by 20 billion to 55 billion crowns. According to the Ministry, the year-on-year comparison reflects the impact of tax changes effective since 2021, in particular a reduction in the tax base by more than 25 percent and an increase in the taxpayer’s rebate. The collection was also negatively affected by the compensation bonus paid during 2021. “On the contrary, the collection has been increased in recent months by the payment of rewards to health professionals,” the ministry said.

In the case of expenditure, current expenditure increased. At the end of July, the state spent 1.04 trillion crowns on current expenditures, a year-on-year increase of 102.2 billion. On the other hand, capital expenditures fell by 8.6 billion year on year to 73.7 billion crowns.

At the end of July, the state paid 407.7 billion crowns in social benefits, a year-on-year increase of 10.2 billion crowns. Of this, 310.8 billion crowns went to pensions.

The state budget deficit of CZK 500 billion has been approved for the entire year. Last year, when the result was affected by the effects of the pandemic, the state budget ended in a deficit of 367.4 billion crowns. The Ministry of Finance proposes a deficit of 390 billion crowns next year.