Czech FinMin downgrades GDP outlook, expects higher budget gap

In April, the ministry expected GDP to grow by 0.2 percent this year and by 1.3 percent next year.

Owing to the worse economic development and lower budget revenues, the state budget deficit may increase by Kc10bn, according to the material.

The state budget for this year has been approved with a deficit of Kc105bn.

"The government will eliminate this risk by austerity measures on the side of expenditures," the material says.

In February, the government froze budget expenditures worth Kc23.6bn. It also expects to save Kc12bn in expenditures on the state debt and another Kc1.5bn in the General Treasury Administration chapter.

"We do not plan further flat cuts. Savings will be made in chapters under the Finance Ministry, for instance in costs of the state debt servicing," Prime Minister Petr Necas said.

The GDP growth should accelerate to 1.9 percent in 2014 and to 2.7 percent in 2015, according to the new forecast.

According to Necas, inflation will reach 2.2 percent next year, thus approaching the 2-percent inflation target of the Czech National Bank (CNB).

"No excessive jump price hike is taking place as a result of changes in VAT. The situation on the labour market is relatively very good in the context of entire Europe," Necas said.

Finance Ministry estimates (previous forecast from April in brackets):

Source: Fiscal Strategy in Light of New Macroeconomic Prediction (Finance Ministry)

Author: ČTK
www.ctk.cz