Czech FinMin to again cut 2013 GDP forecast as VAT revenue misses expectations.

By bne IntelliNews October 29, 2012
The Czech finance ministry will lower its GDP growth forecast for next year to 0.7% from 1% mainly due to lower-than-expected VAT and insurance revenue, Mediafax news agency cited deputy finance minister Ladislav Mincic as saying in a programme on Prima Family TV. In its latest macroeconomic forecast released in July, the ministry said it expects the economy to expand by 1% in 2013, cutting its estimate from an earlier projected growth of 1.3%. In the new forecast, due to be published on October 31, the ministrys GDP growth forecast for 2013 will be 0.7%, Mincic said adding that the 0.3ppt decline in the GDP growth will result in lower budget revenue of CZK 10bn (EUR 401mn). The forecast will also affect next years budget that seeks to cut the budget deficit to 2.9% of economic output from 3.2% expected for 2012. In order to cut the gap the government will count on a tax hike plan that envisages a 1pp hike in both VAT rates to 15% and 21%, respectively, and the introduction of extra levy on high wage earners and abolition of caps on health insurance payments. The government hopes the plan will help it boost next year's budget revenue by CZK 20bn (EUR 803mn). However, last week the government decided to pull from the parliamentary agenda the 2013 budget draft amid a row within the senior ruling Civic Democrats over the tax hike bill.

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