Czech FinMin sees higher budget gap for 2014 as govt boosts spending to help ailing economy.

By bne IntelliNews June 11, 2013

The Czech state budget deficit for next year is forecast to rise to CZK 105bn (EUR 4.1bn) from CZK 100bn planned for 2013 as the government will be boosting spending to help the economy that has been in recession since late 2011, the longest on record, CTK news agency reported citing a finance ministry’s draft due to be discussed by the government at a meeting on June 12.

Originally the government was projecting to trim the budget gap to CZK 85bn in 2014 but now it wants to raise spending by CZK 15bn to support the economic growth. The budget deficit target for 2015 was revised up to CZK 110bn from 50bn on a CZK 10bn hike in expenditures.

Despite the planned higher budget deficit, the ministry is sticking to its aim of cutting the public finance gap to below EU’s threshold of 3% of economic output. It seeks to narrow the gap to 2.8% of GDP in 2013 from 4.4% in 2012 but agreed a looser target of 2.9% for 2015 and 2.8% for 2016. Previously the government was hoping to achieve a balance budget by 2016 but earlier this year it decided to ease its hard line on budget cuts, partly to be blamed for the longest-ever recession, and embark on a pro-growth measures a year ahead of the general elections due in mid-2014 and widely expected to be won by the major opposition party, the Social Democrats (CSSD).

According to the finance ministry’s latest macroeconomic forecast published in April, the Czech economy should post a zero growth in 2013 and expand at a stronger pace in the next three years - 1.2% in 2014, 2.1% in 2015 and 2.6% in 2016.

By September, the government is expected to approve next year’s state budget before submitting it to the parliament.

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