Czech state budget deficit for 2014 undershot by almost 35 billion crowns

Andrej Babiš, photo: Filip Jandourek

Slightly higher revenues and lower than expected spending resulted in the best Czech state deficit figures for five years. The just under 78 billion deficit will, however, increase expectations that finance minister Andrej Babiš can continue the good work in 2015.

Andrej Babiš, photo: Filip Jandourek
The Ministry of Finance announced Monday that it more than hit his target for the state budget in 2014 with a final deficit figure of 77.78 billion crowns. That is the best deficit figure since the heady days of relatively high economic growth in 2008.

The original target deficit for 2014 was set at 112 billion crowns and that was eventually undershot to the tune of 34.2 billion crowns. The deficit for 2013 came in at 81 billion crowns and the target for 2015 is 100 billion crowns.

It has been clear for some time that the eventual figure would be better with both Babiš and Prime Minister Bohuslav Sobotka talking a month ago about a final deficit somewhere in the region of 80 billion to 90 billion crowns in the red.

The final figure is not so much of a surprise given that regular and detailed end of month updates of the state of the budget are released by the ministry.

November’s update already revealed the consequences of the usual last gasp rush by ministries to spend as much of their cash allocation for the year as possible so that they are less vulnerable to spending squeezes in the future. The state deficit for the period from January to November climbed to 68.8 billion crowns from 45.4 billion during the first 10 months of the year. And it’s clear that the trend continued during the final days of 2014.

By November, the overall trends for the year were already apparent: higher direct and indirect tax revenues thanks to the recovering economy just about exceeding rising expenditure as the new government made no secret that some of the past public spending restrictions and pay curbs were being relaxed. At the end of November tax income was 38.3 billion better than at the same time a year earlier with spending up by 27.8 billion.

Social benefit payments continued to account for the biggest chunk of state spending, just over 40%, with raised pensions one of the factors responsible for the fact that the figure was not dented by the decreased number of jobless Czechs. Even so, the final bill for social payments undershot original expectations for 2014 by just under 8 billion crowns. The final figure for 2014 shows state revenues 5.4 billion crowns in excess of expectations. Spending came in 28.8 billion crowns lower than expectations. Around 20 billion crowns more in EU co-financing of projects was one of the reasons for those savings.

Capital spending, that is investment on long term infrastructure climbed by around 10 billion crowns to 112.4 billion crowns compared with 2013. Boosting such spending has been a priority of the new government though evidence from individual state agencies, such as the highways and motorways directorate, has shown that this has not been quite so easy to put into practice.