The state budget plan for this year foresees a deficit of 252 billion crowns. Even though the deficit has already crossed the hundred billion mark, according to the head of the state treasury Zbyňek Stanjura (ODS), this is a year-on-year improvement in the budget deficit by 61.2 billion and a practically balanced monthly economy, which at the same time was the best March result in the last five years.
On the income side, a recovery in household consumption can already be seen
“The results show a return to normality, when extraordinary expenses no longer interfere with the budget, such as last year’s aid to households and companies in the situation of high energy prices. On the income side, a recovery in household consumption can already be seen. Over the next months, the changes brought about by the recovery package, which will reduce the full-year deficit by 43 billion crowns this year, will gradually become more apparent on both sides of the budget,” Stanjura said.
The finances of government institutions ended in a deficit last year
Economy
Budget revenues for the first quarter reached 449 billion crowns. The year-on-year improvement in the balance was contributed by an almost twelve percent increase in income, while expenditures, on the other hand, fell by 2.6 percent year-on-year to 554 billion crowns. While the negative pace of spending was strongly reflected in the fading state aid related to high energy prices, revenues were boosted by March’s 13 billion windfall tax collection.
“Execution of the state budget is traditionally fluctuating and does not develop linearly over the course of the year. Therefore, the overall balance sheet cannot be automatically assessed as an indication of year-round development and it is difficult to compare it with previous years, as the implementation of the budget is influenced by the different timing of income and expenditure as well as legislative changes,” noted chief economist of Cyrrus Vít Hradil.
“However, if we look at the relatively stable and budget-important items, there is no reason to believe at the moment that the reality would deviate significantly from the government’s intention,” he added.
On the income side, the collection of VAT, consumption taxes, income taxes and social insurance is developing approximately in line with the assumptions. “Since it can also be speculated that the Czech economy still has the better part of this year ahead of it, tax collection is doing rather better for now,” Hradil pointed out.
In summary, the first quarter of this year turned out roughly in line with the approved budget
Even on the expenditure side, according to him, nothing is happening that deviates from normal seasonality or the effects of legislative changes. “In summary, the first quarter of this year turned out roughly in line with the approved budget,” concluded the economist.
Collection of personal income tax in the first quarter increased by 12.9 percent year-on-year to 40.8 billion crowns. According to the Ministry of Finance, it was positively affected by wage growth and measures from the consolidation package, such as a reduction in the limit for a higher tax rate. 177 billion was collected from the compulsory insurance premium, a year-on-year increase of 7.9 percent. The reintroduction of the sickness insurance premium and the increase in the assessment base for self-employed people contributed to the growth.
Value added tax collection rose by 8.7 percent to 86.1 billion crowns. 36.9 billion crowns were collected in consumption taxes, 11.6 percent more year-on-year.
The decrease in budget expenditures was mainly due to lower support for households and companies due to energy prices, year-on-year the state paid out 16.6 billion less. The largest expenditure item of the budget was social benefits and pensions, which in total reached 229.2 billion crowns, an increase of 4.8 percent year-on-year. By the end of March, 180.7 billion crowns were spent on pensions, 5.5 percent more than last year.
Indebtedness is growing
Last year, the state budget ended with a deficit of 288.5 billion crowns. Regions and municipalities, however, managed a surplus of CZK 70.3 billion. According to the calculation of the Czech Statistical Office, the deficit of public finances rose to 3.3 percent of gross domestic product from 3.2 percent in 2022.
High state budget deficits lead to deepening indebtedness of the country. The state’s debt increased by 216 billion year-on-year last year and amounted to 3.111 trillion crowns at the end of the year. Expenditures for its operation increased by almost 29 billion from 2019 to last year’s 68.3 billion crowns. This year, debt service expenses are to increase again, to 95 billion crowns
In its annual report for last year, the Supreme Audit Office drew attention to the fact that last year’s increase in state budget revenues did not help sufficiently reduce the pace of state borrowing. Even with the contribution of the extraordinary tax on unexpected incomes, he was unable to ensure that the state budget came close to a balanced economy.
SAO: The state did not ensure that the budget came close to a balanced economy
Economy
