Czech government approves 2021 budget bill with $13.8bn gap

PRAGUE: The Czech government approved the 2021 central state budget bill on Monday with a deficit of 320 billion crowns ($13.84 billion), Finance Minister Alena Schillerova said, that may deepen if a planned personal income tax cut is approved by parliament.

The minority government based its budget revenue calculation - at 1.487 trillion crowns - on an estimated economic growth of 3.9% next year.

The central European country has been struggling with a fresh wave of the novel coronavirus over the past few weeks which has thrown doubt over the economic recovery.

The budget draft, which the minority cabinet needs to push through parliament, has been heavily criticised for not aiming to reduce the deficit more from this year's approved 500 billion crowns caused by the pandemic.

The 320 billion figure equates to about 5.9% of gross domestic product expected in 2021.

Public finance, of which the state budget is the main part alongside other public sector agencies and programmes, should end up in a deficit of 4.9% of GDP in 2021, according to the Finance Ministry's estimate in the budget bill.

The budget balance also does not include the approximately 60 billion crown cost of a deep cut in personal income tax for employees hit hard by the coronavirus-induced economic slump, which would widen the deficit.

Finance Minister Alena Schillerova has said the budget deficit would be adjusted if the cut is implemented.

The budget for 2021, an election year, also includes hikes in pensions and pay for medical personnel and teachers, as well as higher investment.

The Communist party, which has lent support to the centre-left government, has demanded a cut in the budget for the army. That would undermine plans to increase defence spending, still far below Prague's NATO commitment of 2% of GDP.

The Finance Ministry estimates that the 2020 and 2021 central budget deficit will widen the public financing gap to 42.7% of GDP next year from 30.2% in 2019.