The Czech state budget ended 2024 with a deficit of CZK 271.4 billion, making it the fifth-largest in the country’s history since its founding. Prime Minister Petr Fiala and Finance Minister Zbyněk Stanjura (both ODS) presented the budget results, emphasizing that the deficit is the best since the COVID-19 pandemic. However, analysts noted that the government barely met its revised deficit target of CZK 282 billion, aided by an amendment that raised planned spending by CZK 30 billion following September’s floods. State budget revenues totaled CZK 1.965 trillion, marking a 2.7% year-on-year increase, primarily driven by higher collections of compulsory insurance premiums and taxes. Among tax revenues, personal income tax grew the fastest. Expenditures reached CZK 2.236 trillion, up 1.6% year-on-year, with social benefits comprising the largest share at CZK 904.8 billion, including CZK 710 billion for pensions. Capital expenditures stood at CZK 210.1 billion, maintaining last year’s level. Stanjura highlighted that CZK 15.4 billion of the budget was allocated to repairing flood damage, with the Transport Ministry alone using CZK 5.5 billion for infrastructure reconstruction. Prime Minister Fiala commended the government for meeting its budget targets and reducing the deficit both in absolute terms and relative to GDP. He noted that the deficit as a share of GDP has dropped from over 5% when the current government took office to an estimated 2.3% in 2024. “We inherited one of the fastest-debting economies in the EU. This year’s deficit reduction shows our progress in fiscal responsibility,” Fiala said. Stanjura acknowledged that the floods influenced the budget outcome, adding that without them, the deficit would have been CZK 256 billion, slightly higher than the originally approved CZK 252 billion target. He attributed the deviation to increased defense spending, approved late in the year to meet NATO commitments of 2% GDP defense allocation. Opposition leaders were unsparing in their critique. Alena Schillerová, head of the ANO parliamentary club, dismissed the budget outcome as “trivial.” She criticized the government for celebrating a deficit she described as avoidable, given the absence of pandemic-related expenses. “Raising taxes to record levels while delivering a CZK 271.4 billion deficit in a non-crisis year is cynicism of the highest order,” Schillerová said. Economists offered a mixed assessment. While noting an improvement over 2023’s CZK 288.5 billion deficit, they highlighted risks to future budgets. David Marek, chief economist at Deloitte and an advisor to President Petr Pavel, remarked, “Although the deficit improved year-on-year, the planned deficit was exceeded due to late-year adjustments.” Dominik Rusinko, an analyst at ČSOB, expressed caution about the 2025 budget, which targets a deficit of CZK 241 billion. “Election-year spending and an optimistic 2.6% economic growth projection could undermine the government’s plans,” Rusinko warned. The national debt rose from CZK 3.111 trillion at the end of 2023 to CZK 3.365 trillion in 2024. The Ministry of Finance expects it to increase further to CZK 3.614 trillion in 2025. This growing debt burden has led to higher financing costs, with state debt servicing expenditures rising by CZK 20.2 billion to CZK 88.5 billion last year. These costs are forecast to climb to CZK 100 billion in 2025. While the government highlights its commitment to fiscal discipline, challenges loom. The rising national debt, election-year spending, and potential economic slowdown may test the government’s ability to meet its fiscal targets in the coming year. Source: CTK