In this week’s business news: lower house approves package of reform bills, coalition agrees to postpone tax reform until 2014, EC revises Czech growth forecast downward and Czechs pessimistic about the future.
Package of reform bills approved
Photo: CTK
Despite the gloomy economic predictions, the week started well for the governing coalition which overturned a Senate veto to push through 14 reform bills through the lower house. The bills, which still have to be signed by the president, are expected to take effect in January 2011. They will launch an overhaul of the publicly funded pension system by introducing a private pension scheme and a higher retirement age, make Czechs take on more financial responsibility for the health care they receive, affect some tax changes and significantly tighten the rules on welfare in a bid that is expected to bring the country’s public finance deficit under control.
Government postpones tax reform until 2014
Miroslav Kalousek
Although the government’s tax reform was approved, the coalition this week agreed on postponing it until 2014. Finance Minister Miroslav Kalousek rejected speculation that this was a concession to the opposition, saying the postponement was necessary in view of harmonizing the change of legislation with the Civil Code. Changes to gambling taxation alone will take effect as of the beginning of next year.
Coalition breaks ranks on tax reform
During the vote, the governing coalition broke ranks on two counts – in one instance the Civic Democrats allied with the opposition to push through an amendment to the lottery taxation bill under which lottery companies alone would decide on who gets a third of the tax revenues and part of the revenues would also go to the education sector. Under the original coalition agreement the revenues were to have been divided between municipalities and the state, in a 70:30 ratio. According to TOP 09, which is furious over the outcome, municipalities will lose out on approximately 3 billion crowns a year.
In another vote that divided the governing coalition, the junior Public Affairs party joined forces with the opposition to maintain the existing system of tax reliefs for meal vouchers, a very popular form of benefits for communal catering used by many employees.
EC revises Czech growth forecast downward
Photo: Barbora Kmentová
There was gloomy news from Brussels this week as the European Commission revised downward its growth forecast for the Czech economy for both this and next year. According to figures released on Thursday the EC expects the Czech economy to grow by a mere 1.8 percent this year, down from an earlier 2 percent forecast, while next year’s growth estimate is now at 0.7 percent down from a previous 2.9. The predictions are more dire than those released both by the International Monetary Fund and the Czech Finance Ministry. The ministry’s latest growth predictions speak of a 2.1 percent growth this year and a 1 percent growth in 2012.
According to the EC the Czech Republic’s public-finance deficit, which serves as a yardstick for assessing an EU member’s readiness to adopt the euro, will drop to 3.8 percent of GDP next year, which would exceed the government’s target of 3.5 percent of economic output.
October inflation growth
Inflation unexpectedly accelerated to the fastest pace in 10 months in October. The inflation rate rose to 2.3 percent from 1.8 percent in September, according to figures released by the Czech Statistical Office. Consumer prices rose 0.3 percent from the previous month.
Poll: Czechs pessimistic about future
Illustrative photo: Štěpánka Budková
According to the results of a poll conducted by the STEM agency almost three fifths of Czechs believe that the country’s economic situation will deteriorate in the next five years. According to the agency this is the most pessimistic outlook in the last 18 years. STEM also says it has never occurred before that more than 50 percent of respondents expect a turn for the worse in a five-year perspective. Some 44 percent of those polled said they expected their living standard to drop in the coming five years. Left-leaning voters and older people tend to have gloomier expectations, the agency said.
