In 2019, the state’s finances ended up with a deficit of 28.5 billion crowns, said Finance Minister Alena Schillerová, at a press conference today. The approved budget planned on a deficit of 40 billion crowns.
The better-than-expected result was due primarily to non-tax and capital revenues, which were above plan by more than 38 billion crowns. On the other hand, compared to plan, tax income, including social security premiums, lagged by 11 billion crowns, Ministry of Finance data reveals. “The 2019 state budget deficit ended up being a bit better than planned. That is not bad news. But what I consider more important is the information that, for the first time since 2013, tax income of the state budget did not reach the planned level. Eleven billion crowns is not a great amount in the grand scheme of things, given that the difference amounts to less than 1% of total revenue, but it is a clear reflection of the trend of a slowing economy,” said Chairman of the Czech Fiscal Council Eva Zamrazilová.
The deceleration of the GDP growth rate was adversely manifest, for example, in the collection of VAT, where approximately 8.5 billion less than planned was collected. Nearly five billion less than expected was also the highest income item of the state budget – social security premiums.
In total, state budget revenue amounted to 1,523.23 billion crowns, being 27 billion crowns higher than originally planned. State budget expenditure also exceeded the plan, by nearly 16 billion crowns. Current expenditure accounted for most of these (in particular, the chapter “Other current expenditure”). Capital expenditure amounted to 139.26 billion crowns, 2.1% higher than planned.
This year’s budget was also approved with a deficit of 40 billion crowns. The Ministry of Finance is expecting a continued slowing of the rate of economic growth, to 2%; however, it states, at the same time, that the risks of its prognoses are deviated downwards. “In a situation when most risks to Czech public finance lie abroad, caution is in order. The government should have projects and measures up its sleeve to quickly support the economy, if required. It remains to be seen, however, where the government will get money for implementing such measures. Despite the favourable economic situation in recent years, we do not see any major reserves to which resort could be had,” says Chairman of the Czech Fiscal Council Eva Zamrazilová.
The Czech Fiscal Council has previously asked the government to preventively prepare specific measures to support the economy. For example, in its opinion of 4 December 2019, it states: “Maintaining the dynamism of economic growth at around 2% is conditioned on the non-materialisation of foreign risks (in particular the introduction of barriers limiting international trade) which would affect primarily the domestic industrial sector. Hence, the CFC is of the opinion (as in its September 2019 opinion) that the government should prepare a specific form of fiscal stimulation for the economy, in the event that extreme risks materialise along with a further loss in the dynamism of economic growth.”
(source of the graph at the beginning: Ministry of Finance of the Czech Republic)