Czech budget for 2025 under fire both from opposition and experts
The Czech Chamber of Deputies on Tuesday passed the 2025 state budget with a CZK 241 billion deficit. It was approved with the support of the four ruling parties, despite strong criticism from the opposition, including the Pirate Party, which recently left the coalition government. Vít Pohanka asked Lukáš Kovanda, chief economist at Trinity Bank, for his assessment of the budget.
"Firstly, it would be great to see a more ambitious decline of Czech deficits than the current one, because there is still quite a high structural deficit, more than 200 billion crowns, which is quite high, and it's much higher than this government promised some two or three years ago, before the last elections in 2021. Then the government said and promised that it would significantly lower the deficit and would aim to have a zero deficit and healthy public finances. But when you see the budget and its deficit for next year, you cannot say it's really a healthy deficit or any sign of healthy public finances."
"On the other hand, the positive trend is when you compare the absolute number with the GDP, then we can assess it as a gradual stabilization of Czech public finances. From this point of view, the Czech government, to some extent, really has fulfilled its promises. Despite some increases in allocations for areas like justice and infrastructure, opposition parties have criticized the budget."
One could say that that's the role of the opposition to always criticize the budget. But from your economic standpoint, do you think that the criticism was justified to a certain extent or even to a large extent?
"It's not just the opposition who has been criticizing the budget, also economists that are advising President Petr Pavel. And it is especially important because, as we know, the president may still veto the budget, and there is a likelihood he really will do it."
"So there are a lot of opposition politicians who have been criticizing it. And of course, maybe the criticisms of those experts are not as strong as the criticisms of opposition parties. But still, we cannot say that it's just the opposition who have been criticizing the budget."
Among other things, the budget actually assumes a 2.7% growth of the economy, which is significantly higher than this year, and also a significant reduction of inflation. How realistic or rather unrealistic are these projections?
"When you look at the last and recent numbers for Czech growth next year from a number of domestic and international organizations, banks, financial houses, and so on, you may see that the forecast is worse compared to what the Minister of Finance has claimed. And we may have another source of problems here because of too optimistic expectations and forecasts. We may have a shortfall of about 30 billion crowns, another 30 billion crowns for next year."
Okay, to sum it up, the sense I get from what you say—this is not a very well-prepared budget, right?
"This is not a well-prepared budget, and it's not just a political view of an opposition politician who, of course, would quite naturally criticize it almost under any circumstances. This is really an expert conclusion. There are really a number of reasons why things may go wrong, and I am quite sure that this budget is not well-prepared for such a situation."
