Prague - The Czech state budget is to post a deficit of about Kc90bn this year, while the approved budget has a deficit of Kc112bn, Finance Minister Andrej Babis said at a press conference after meeting Prime Minister Bohuslav Sobotka today.
Premiér Bohuslav Sobotka (vlevo) navštívil 7. srpna prvního místopředsedu vlády a ministra financí Andreje Babiše (vpravo) v pražském sídle jeho úřadu. ČTK Doležal Michal
At end-July, the state budget run a Kc4.5bn surplus. But as of today the budget already shows a Kc7.5bn deficit, Babis said.
"We have managed to collect Kc25bn more in taxes so far this year. The budget run a surplus, but as of yesterday (Wednesday) it has a deficit of about Kc7.5bn. The overall deficit will be lower than planned and can amount to Kc90bn," Babis said.
Babis said at the beginning of July that he expects the budget deficit to reach about Kc100bn this year.
"It is a realistic estimate and the figure may even be lower," commented Deloitte chief economist David Marek. This year´s state budget was prepared with an assumption that GDP will grow by 1.3 percent but the Finance Ministry now predicts a 2.7 percent expansion for this year, said Marek.
"If the economy rises by more than 3 percent the end of the year can even see a budget deficit of around Kc80bn," Marek added.
As regards the preparations of the budget for next year, Babis said he would like to maintain the planned deficit of Kc100bn, although requirements for an increase of expenditures reach almost Kc60bn.
The government is expected to start to discuss the budget in September and approve it at the end of the month.
Sobotka appreciated Wednesday's agreement between the government and part of the opposition on the form of the civil service law. The agreement will help to unblock talks in the Chamber of Deputies in September, Sobotka said.
"It will enable us to push trough tax proposals related to the preparation of the te state budget," he said.
These proposals include above all the amended law on value added tax (VAT) which introduces a lower 10 percent rate on baby formula and pharmaceuticals.
VAT, at least on food, could be lowered as of 2016, according to Sobotka.
The drop would follow the planned introduction of electronic registration of sales, which is now being prepared by the Finance Ministry.
"Other changes to VAT must in some way concern food. ... Our rates on food are by far the highest among the neighbouring countries," Sobotka said.
But Babis said it is not optimal to introduce a third VAT rate.
Sobotka today appreciated the six-month work of the Finance Ministry under Babis.
"We did not find a topic over which we would utterly disagree. I am satisfied with the work of Mr. minister (Andrej Babis)," Sobotka said.
In 2013, the Czech state budget posted a Kc81.3bn deficit. The deficit was originally planned at Kc100bn.