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.