Czech budget deficit narrows to CZK 165.4 billion by end of August

The Czech state budget deficit stood at CZK 165.4 billion at the end of August, down from CZK 168.2 billion in July, according to figures released by the Ministry of Finance. Although this is the lowest August shortfall in six years, it remains the sixth-largest in the country’s history. A year earlier, the deficit reached CZK 175.8 billion.

Budget revenues for the first eight months of the year rose by 5.5% year-on-year to CZK 1.34 trillion, supported by a 9.4% increase in tax receipts and a 7.3% rise in compulsory insurance contributions. Expenditures amounted to CZK 1.505 trillion, 4.1% higher than in the same period of 2024.

Finance Minister Zbyněk Stanjura noted that the comparison with last year is affected by lower revenues from the European Union and a decline of CZK 16.5 billion in dividend income from state-owned enterprises. Adjusted for these factors, the deficit has improved by more than CZK 44 billion compared with August 2024. He attributed the result mainly to faster growth in taxes and insurance premiums, which outpaced the increase in current spending by 6.9 percentage points.

Analysts expect the government to meet its planned annual deficit target of CZK 241 billion. According to PwC partner Jan Brázda, continued growth in tax and premium revenues above 8% and restraint in current expenditure will be crucial. He cautioned, however, that governments often face pressure to loosen fiscal discipline in election years.

Personal income tax collection rose by 13.1% year-on-year to CZK 121.2 billion, supported by wage growth. Corporate income tax revenues increased by 10% to CZK 121.5 billion. Value-added tax remained the largest source of income, generating CZK 265.1 billion, up 8.2% compared with a year earlier. Excise duties rose by 4.2% to CZK 110.2 billion, with mineral oil taxes boosted by higher rates and stronger demand.

On the expenditure side, social benefits accounted for CZK 615.2 billion, 2% higher year-on-year, with pensions making up CZK 477.1 billion of the total. Debt servicing costs increased by 13.5% to CZK 58.6 billion. Capital investment rose by 23.9% to CZK 127.9 billion, driven largely by transfers to the State Fund for Transport Infrastructure, which nearly doubled to CZK 56.3 billion to support infrastructure renewal following last year’s floods.

For 2025, the government projects revenues of CZK 2.086 trillion and expenditures of CZK 2.327 trillion, with a planned deficit of CZK 241 billion. Last year, the budget deficit closed at CZK 271.4 billion, the lowest since the pandemic but still the fifth-largest in the country’s history.

Source: CTK