Fischer: State budget gap to reach at least CZK 150bn in 2009

Prague, July 1 (CTK) - Deficit of the Czech state budget for 2009 will reach at least Kc150bn, Prime Minister Jan Fischer said Wednesday after meeting Czech National Bank (CNB) governor Zdenek Tuma.

Estimates have so far reckoned with the amount of Kc150bn as the limit for this year's budget deficit.

Tuma and Fischer said it is necessary in the future to change the structure of the state budget expenditures, above all mandatory spending, to ensure a satisfactory development of public finances.

Mandatory expenditures include welfare benefits, unemployment benefits and pensions, for instance.

"It will be difficult in the future to finance public finances with such a structure," Fischer said.

Cuts in mandatory spending will not be automatic, though, according to him. All aspects have to be taken into account including expediency or structure of the expenditures, he said.

Fischer also said the government will have a clearer stance on the future of the Czech economy and public finances at the end of the month when the Finance Ministry will make public its macroeconomic forecast.

With respect to the global crisis, the Czech economy is in a relatively good state and the financial sector is stable, said Tuma. As an open economy, however, it will not avoid contraction because it is linked to the eurozone countries, Germany in particular.

Czech state budget posted a deficit of Kc68.3bn at end-June. The parliament has approved a budget for this year with a Kc38.3bn gap.

Next year's gap is foreseen at Kc166bn, in 2011 it is expected to reach Kc164bn and a year later Kc158bn.

Deputies and a government to emerge from the early election in October will, however, have a final say on the state budget.