Czech government unveils final figure for record 2009 state deficit
The Czech government has unveiled the final figure for last year’s state budget deficit. Previous updates had already signalled that the sobering statistic for 2009 would be the worst in the country’s history. But it will nonetheless be seized on by politicians and pored over by analysts.
Official figures from the Ministry of Finance on Monday showed that the Czech state budget deficit plunged into the red last year to the tune of around 192 billion crowns, or around 10.5 billion US dollars. That is a record figure for the country.
The deficit was originally set at around 38 billion crowns by the former centre-right government of Mirek Topolánek ahead of the economic crisis.
But that crisis slashed state income, mainly tax revenues from struggling companies, and boosted unavoidable spending on unemployment and other social benefits.
The head economist of UniCredit’s Czech operations, Pavel Sobíšek, says the real figure for the Czech public deficit is even higher than the latest sobering statistic. He points out that it does not include a transfer of around 32 billion crowns from reserves last year and that losses from other state bodies have not been included.
“Putting all the figures together, I think we will be somewhere between 6.0 and 7.0 percent of Gross Domestic Product in terms of last year’s budget deficit. It is pretty bad.”
A state deficit of no more than 3.0 percent is one of the qualification criteria for joining the eurozone. That is the level judged acceptable and affordable long term for developed European countries.
But Mr. Sobíšek says that one positive factor for the Czech Republic is that most developed countries are facing similar deficit problems. This has translated into a fairly lenient view of the rocketing Czech deficit by the international agencies which play a decisive role in determining countries’ credit worthiness. But he warns this situation could change if action is not taken by whatever government follows on from parliamentary elections in May.
The autumn is when a new budget for 2011 should start to be thrashed out.
The Czech Republic is currently given a top tier rating by the main credit agencies. A downgrade to one notch lower would still keep it within that grade but Mr. Sobíšek warns it would fuel worries over an eventual expulsion from the top credit group. Any downgrade would put the government in a tighter financial spot, increasing the costs of new borrowing and servicing already accumulated debt.
