Economists sound the alarm: Czech budget deficit could "significantly" exceed 400 billion crowns

Czech Prime Minister Andrej Babiš has said that next year's state budget deficit will come in "significantly below 400 billion crowns," compared with the 310 billion crown target the government hopes to hit this year. The statement has drawn sharp criticism from the opposition and economists, who warn of a dangerous loosening of fiscal rules.

According to Finance Minister Alena Schillerová, a precise deficit estimate will only be possible once the August macroeconomic forecast has been processed. Babiš stressed that he intends to push ministers to cut current spending, while at the same time planning investments in healthcare, motorway construction and city bypasses. He also confirmed that defence spending will remain at two percent of GDP.

Opposition figures have accused the government of continuing to undermine the country's future through a widening deficit. ODS leader Martin Kupka said Babiš and Schillerová had unleashed a "budgetary Armageddon," pointing in particular to an amendment on how public budgets are drawn up, which the ruling coalition intends to push through parliament despite a presidential veto.

Earlier, a group of twenty Czech economists, including National Budget Council chairman Mojmír Hampl, issued a warning. On Tuesday they sent a letter to lawmakers urging them to take seriously the substantive arguments that led President Petr Pavel to veto the fiscal responsibility law. In their view, budgetary rules are a standard and essential part of legislation in developed countries.

Finance Minister Schillerová dismissed the criticism, as did Prime Minister Babiš, who described the economists' appeal as a political statement.

Speaking on the podcast "Ptám se já," Mojmír Hampl compared the current situation to the approach of former Finance Minister Zbyněk Stanjura toward individual budget items: "Back then, it sometimes looked like a disguised foul or an offside play. Now the level is something else entirely — we're being told the lines on this field need to be erased completely," the economist said.

Source: seznamzpravy.cz