Czech deficit ends October at 29% of full year target

By bne IntelliNews November 2, 2015

The Czech state budget produced a deficit of CZK29.1bn (€1.1bn) in the first ten months of the year, data released by the finance ministry showed on November 2.

Despite widening from a gap of CZK2.77bn a month previously, the result represents the smallest ten-month budget shortfall since 2008. It also shows the government will likely easily beat its full-year target for a deficit of CZK100bn.

The hugely positive result reflects better-than-expected economic growth. When setting its initial target, the government projected GDP growth of 2.5% for 2015. Its latest forecast is for a 4.5% expansion.

A massive inflow of EU money has helped both the budget and growth, as the government pushes hard to tap the remaining funds of the 2007-2013 programming period, Drimal Marek at Komercni Banka tells bne Intellinews. 

“Combined, these one-off factors are the drivers behind the positive developments, despite fiscal-easing measures on both the revenue and expenditure sides of the budget that the government approved for this year”, he adds.

On an annual basis, the budget shortfall was much smaller than the CZK45.4bn deficit registered at the end of October 2014. The improvement mainly reflects a 9.5% rise in budget revenues. Expenditures also increased but at the slower annual pace of 7.3%.

The growth in budget revenues was supported by higher receipts from VAT and excise taxes as well as rising revenue from social security insurance and corporate income tax. A CZK53.4bn rise in EU transfers also played a role.

On the expenditure side, the biggest effect came from a CZK40bn growth in capital expenditures, mainly reflecting investments in projects co-financed with EU funds, the ministry said. 

State budget (CZK bn)          
  End-Oct 2015 End-Oct  2014 Change (%, y/y) 2015 adjusted budget plan Relation to plan
Revenues 997,17 910,8 9,5% 1179,43 84,5%
Tax revenues (without contributions) 487,88 470,32 3,7% 575,08 84,8%
VAT 196,43 195,59 0,4% 229,3 85,7%
Excise tax 115,84 109,71 5,6% 135,4 85,6%
Social and health insurance 332,76 315,14 5,6% 400,67 83,1%
Expenditure 1026,29 956,25 7,3% 1279,43 80,2%
Social benefits 415,26 406,03 2,3% 508,68 81,6%
Pensions 322,48 314,13 2,7% 390,94 82,5%
Own payments to EU budget 27,4 31,01 -11,6% 38,86 70,5%
Capital expenditures 111,63 71,1 57,0% 130,89 85,3%
Balance -29,13 -45,44 -35,9% -100 29,1%
Source: Finance ministry

Related Articles

ECB holds a meeting in Riga without Latvian central bank governor

The European Central Bank governing council met in the Latvian capital Riga on June 14 with the host, the beleaguered governor of Latvijas Banka Ilmars Rimsevics, not attending. Rimsevics ... more

One to two-notch downgrade implied for Turkey by spread on eurobond says RBI

A one to two-notch downgrade is implied for Turkey by the spread on its sovereign USD eurobond due 2028, Raiffeisen Bank International (RBI) said on June 12. In a note to investors, RBI analyst ... more

Croatia raises €750mn in 10-year Eurobond

Croatia issued €750mn through a Eurobond maturing in 2028 at a yield of 2.898% and bearing a coupon rate of 2.700%, the government announced on June 7. Improving macroeconomic ... more