Czech c-bank improves 2012 budget gap outlook to 3% of GDP.

By bne IntelliNews May 14, 2012
The Czech general government deficit is to narrow to 3% of GDP this year from 3.1% in 2011, the central bank said in the latest inflation report published on May 11, 2012 revising its forecast from 3.4% expected earlier. The improvement is thanks to CZK 29bn (EUR 1.1bn) higher tax revenues due to the VAT hike. In the next year, however, the gap is seen widening to 3.8% of GDP due to the halt in economic growth in 2012 and the introduction of a pension reform in 2013 that would lead to a shortfall in social security revenue of CZK 15bn. According to the finance ministry's plans and updated convergence programme, the general government deficit should reach 3% of GDP this year and fall further to 2.9% in 2013 and to 1.9% in 2014. The central bank raised its expectations for this years government debt to 43.2% of GDP from 43% and said next year the debt should reach 45.2%.

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