Czech budget gap shrinks 46% y/y in Jan-Aug on higher VAT collection, EU inflows

By bne IntelliNews September 3, 2013

The Czech central budget deficit shrank by 46% on the year to CZK 36.21bn (EUR 1.4bn) in the first eight months of 2013 thanks to higher revenue from value added tax and EU funds, data from the finance ministry showed. The end-August deficit was the best result since 2008 and accounted for 36.2% of the full-year target suggesting that the government will likely be able to meet the end-year deficit target of CZK 100bn despite higher spending to remove damages from the floods that hit the country in early June. The end-Aug gap, however, widened from CZK 27.6bn at end-July.

Total budget revenue in Jan-Aug 2013 grew 5.8% y/y to CZK 703.5bn, accounting for 64.9% of the annual target. Revenue from taxes edged up by 0.1% y/y as VAT collection improved by 11.3% y/y to CZK 141.8bn, while excise taxes declined by 5.5% y/y. The rise in VAT revenue was partially thanks to a 1pp rise in both VAT rates as of Jan 1. Income from EU funds rose by CZK 32.9bn in the period.

Budget expenditures also increased but at the much slower annual pace of 1% to CZK 739.7bn as of end-Aug, equalling to 62.5% of the annual plan.

The Czech central state budget deficit shrank 29.3% on the year to CZK 101bn in 2012, overshooting the government's target of CZK 105bn as increased savings compensated for lower-than-planned revenue. The government targets the overall public sector deficit, including the central government budget, regional and local budgets, public funds and public health insurance, to account for 2.8% of GDP in 2013.

CZKbn Jan-Aug 2013 Jan-Aug 2012 2013 adjusted budget plan Relation to plan %
Revenues 703.49 665.12 1 084,03 64.9
Tax revenues (without contributions) 342.45 342.24 554.23 61.8
VAT 141.82 127.47 212 66.9
Excise tax 84.75 89.66 142.2,2 59.6
Social and health insurance 246.17 247.44 377.77 65.2
Expenditure 739.7 732.14 1 184,03 62.5
Social benefits 317.5 318.47 495.63 64.1
Pensions 248.3 252.18 389.84 63.7
Own payments to EU budget 28.95 25.62 36 80.4
Balance -36.21 -67.02 -100 36.2
Source: Finance ministry        

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