COMMITTEE ON BUDGETARY FORECASTS: NEW MACROECONOMIC AND FISCAL FORECAST OF THE MINISTRY OF FINANCE IS REALISTIC

COMMITTEE ON BUDGETARY FORECASTS: NEW MACROECONOMIC AND FISCAL FORECAST OF THE MINISTRY OF FINANCE IS REALISTIC

The Committee on Budgetary Forecasts met on Monday 15 April 2019, its second meeting of the year. In contrast to January’s meeting, this time the Committee evaluated not only the latest macroeconomic forecast of the Ministry of Finance of the Czech Republic but also the ministry’s fiscal forecast.

The Committee viewed  April’s macroeconomic forecast  , which among other things reduced the estimated growth in the Czech economy this year from January’s estimate by one percentage point, to 2.4 %, as realistic in terms of the likelihood of its fulfilment in 2019 and 2020. Six members of the Committee voted in favour of this evaluation, while two members voted against and considered the forecast to be optimistic. The remaining two members of the Committee were excused from discussion of the macroeconomic forecast.

The Committee on Budgetary Forecasts stated in the reasoning of its statement that the ministry’s macroeconomic forecast would appear to be internally consistent and corresponds in key macroeconomic parameters to the development that members expect. In the discussion, members of the Committee pointed to significant uncertainties which complicate the outlook, particularly in the external environment. Some members stressed the considerable deterioration in consensual outlooks for the global economy and expressed the view that this fact might not be taken into sufficient consideration in the forecast of the Ministry of Finance. The deterioration of foreign demand would in their view be reflected in the Czech economy in weaker private consumption and weaker investments.

Other members of the Committee also mentioned the uncertainty of investment activities, whilst some pointed to the possibility of faster growth in the creation of fixed capital in 2020 than the ministry’s forecast expects. “The high level of uncertainty has recently been one of the most commonly used expressions by macro-economists, and the discussions of the Committee on Budgetary Forecasts proved no exception in this respect. For the time being, however, the uncertainty is not transmitted into the fundamental macroeconomic scenarios of most of the members of the Committee. The consensual outlook for the growth of the Czech economy this year and next year has therefore not changed much, which is reflected in the new forecast from the Ministry of Finance of the Czech Republic,” said Chairman of the Committee on Budgetary Forecasts Pavel Sobíšek after the meeting.

After adopting a statement on the macroeconomic forecast, members of the Committee on Budgetary Forecasts moved on to consider the fiscal forecast of the Ministry of Finance of the Czech Republic. In line with its task, the Committee only evaluated the parameters of the income side of the budget for government institutions, not considering the expenditure side.
A majority of the Committee evaluated the fiscal forecast as realistic. Six of the seven members of the Committee in attendance voted in favour of such evaluation, while one member of the Committee considered the fiscal forecast to be optimistic. The three remaining members of the Committee were excused from discussion of the fiscal forecast. According to the reasoning which the Committee provided for its decision in its statement, the opinion prevailed among the members of the Committee that the budgetary incomes for the years 2019 and 2020 predicted by the Ministry of Finance of the Czech Republic are realistic in all material respects and correspond to the macroeconomic forecast of the Ministry of Finance. Some members pointed to the risks of failure to achieve budgetary incomes. In doing so, they primarily drew on variances in macroeconomic assumptions in comparison with the forecast of the Ministry.

The next meeting of the Committee on Budgetary Forecasts will most likely be held in August in relation to the publication of the next macroeconomic forecast and fiscal forecast of the Ministry of Finance of the Czech Republic.

Statement of the Committee on Budgetary Forecast, 15 April 2019