Czech government sticks to 2020 budget deficit target

PRAGUE: The Czech government unveiled plans on Monday to maintain a 40 billion crown ($1.73 billion) central government budget deficit in 2020, sticking to its past target despite a slowing economy and growing spending commitments.

Czech Prime Minister Andrej Babis said on Monday there was no reason to worry about the economy slowing down and ministries were finding necessary savings in operations and personnel.

The deficit goal is unchanged from the 2019, target, which Finance Minister Alena Schillerova said was still on track to be met.

The Czech Republic's overall public finances have been one of the European Union's stronger performers in recent years with a fiscal surplus since 2016, although weakening growth and higher promised spending have pushed it to seek savings in the 2020, budget.

"I just want to confirm that the Czech Republic is doing excellent, that we have one of the best results in Europe, ours is one of the most stable economies, there is growth and we continue in decreasing the state debt as measured against GDP (gross domestic product)," Babis told a news conference at the finance ministry.

Babis's government has come under criticism by some economists for boosting spending too generously, strapping future budgets when the economy slows and under-investing.

The Finance Ministry has forecast the overall fiscal balance, which includes also regional government budgets and some healthcare along with the central state budget, to fall back into a slight deficit in 2020.

It cut its 2019, growth outlook cut earlier this year to 2.4pc, down over half a percentage point from earlier forecasts. Growth next year is seen at the same pace.

Babis said in a post on his Facebook profile on Sunday evening that state income would increase by around 100 billion crowns next year. He said a planned digital tax would raise around 5 billion crowns.

Investment spending was set to rise by 13 billion crowns to 135 billion crowns, he said.

Child care benefits will also rise, costing the budget 8.6 billion crowns.

Babis on Monday said talks were also progressing with banks on a potential state development fund that could have starting capital of 6 billion crowns, contributed by the biggest banks.