?R to cut public finance deficit to below 3% this year | Prague Monitor

?TK |

25 February 2013

Prague, Feb 22 (CTK) - The Finance Ministry expects to keep public finance deficit below the planned 3 percent of GDP this year on condition the economic situation in Europe does not worsen dramatically, Finance Minister Miroslav Kalousek said in reaction to estimates released by the European Commission Friday.

The EC said in its new forecast it expects the Czech public finance deficit to reach 3.1 percent of gross domestic product (GDP) this year. The Finance Ministry reckons with a 2.9 percent deficit.

For the year 2012, the EC expects a public finance deficit at 5.2 percent owing to a one-off operation involving the entry of the restitution of church property on budget accounts. The restitution claims contributed 1.5 percent to the deficit.

The EC also said Friday it expects the Czech economy to stagnate this year.

"This is a forecast. Unless the economic situation in Europe worsens markedly, we will maintain the deficit below 3 percent so as we can finish the excessive deficit procedure," Kalousek said.

Kalousek does not plan to introduce any extraordinary measures in the state budget if the deficit is higher,

"Two or three tenths of percent of GDP is a task that the government can cope with in operating expenses of its ministries," he said.

The EC opened the excessive deficit procedure for the Czech Republic in 2009 when the country's budget deficit was almost double the permitted limit. The EU demands that the Czech government should cut the deficit below 3 percent of GDP by 2013.

The procedure might lead to a suspension of European subsidy payments in an extreme case.

The public finance deficit is calculated as the difference of revenues and expenditures of ministries and other government institutions, municipalities, selected state-subsidised organisations, state and other off-budget funds (Land Fund, Support and Guarantee Agricultural and Forestry Fund, Wine Fund and others), Railway Infrastructure Administration, transformation institution Prisko, PPP Centre, public universities, public research institutes, health insurance companies, associations and unions of health insurance companies, and Centre of Interstate Settlements.

CR's macroeconomic indicators:

2012 2013 2014
GDP (change in pct against previous year) - 1.1 0.0 1.9
Unemployment (in pct, Eurostat methodology) 7.0 7.6 7.3
Inflation (HICP, in pct) 3.5 2.1 1.6
Budget deficit (as pct of GDP) - 5.2 - 3.1 3.0
Debt (as pct of GDP) 45.5 48.0 49.5

Source: European Commission

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Source: http://praguemonitor.com/2013/02/25/%C4%8Dr-cut-public-finance-deficit-below-3-year

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