The Pak Banker

Czech finance minister sees 2020 budget gap below target

- PRAGUE -AFP

The Czech central state budget deficit should come 20% below its amended 2020 target, provided the country can contain a new wave of coronaviru­s infections without shutting down the economy, Finance Minister Alena Schillerov­a said.

Following several revisions to account for the coronaviru­s crisis, the deficit goal has been pushed to 500 billion crowns or 8.8% of GDP from the original 40 billion target, but Schillerov­a said the budget was on track for a 400 billion crown shortfall.

"If there won't be any blanket measure, (and) we don't want to shut the economy... I venture to say that it will be around 400 billion," Schillerov­a told Reuters in an interview. The Czech government has called for a state of emergency from Oct. 5 and imposed renewed curbs on gatherings and public events to combat a surge in infections. Next year's deficit may be close to the 2020 level and above what her ministry has pencilled in, because of additional tax cuts meant to bolster consumer spending, she said.

The Czech economy is expected to contract by 6% to 8% this year after it went through a partial lockdown following the initial COVID19 outbreak this spring. For 2021, when a general election is due, the finance ministry plans a deficit of 320 billion crowns, which accounts for a scrapped real estate transfer tax, higher pensions and teachers' salaries and increased spending on health.

The proposed deficit could swell by another 60 billion if the minority government manages to push through an income tax cut, Schillerov­a said. "We will support the economy, we will support the people so that they won't be afraid to spend money," she said.

Critics say that while boosting spending this year was correct, an anticipate­d economic rebound means spending should be getting closer to normal and the proposed budget breaches legal limits and leaves no room for unexpected spending. Schillerov­a said, however, next year's 3.9% growth forecast should be seen in the context of this year's dramatic collapse.

"The 3.9% is a beautiful growth in a boom, but when you climb from such a cellar, where we are now, then ... it is not such a win," she said.

The Finance Ministry estimates that this year's and next year's central budget deficit will bring the nation's public finance gap to 42.7% of gross domestic product in 2021 from 30.2% in 2019. Schillerov­a did not see a reason for concern. "We are still below the debt-brake," she said, referring to a law which says that once public finance gap exceeds 55% of GDP, saving measures must kick in.

Germany, current president of the European Union, expects to resolve controvers­ial details of the distributi­on of money from the 750 billion euro ($879.30 billion) recovery fund with its EU partners this month, government sources said on Friday. The EU's 1.1 trillion euro budget for 2021-2027 and the 750b recovery package, agreed by EU govts after a tortuous four-day summit in July, have to be agreed unanimousl­y.

 ?? LONDON
-REUTERS ?? Britain's Prime Minister Boris Johnson speaks outside Downing Street.
LONDON -REUTERS Britain's Prime Minister Boris Johnson speaks outside Downing Street.

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