ČNB improves public finance gap estimate to 5.3% in 2010

Prague, Nov 12 (CTK) - The Czech National Bank (CNB) has improved its estimate of public finance deficit to 5.3 percent of GDP for this year and to 4.2 percent GDP for next year, according to the inflation report released by the CNB Friday.

In 2012 the central bank expects a deficit of 4 percent of GDP.

The threshold for euro adoption is 3 percent.

In its previous estimate, the CNB forecast a deficit of 5.4 percent of GDP this year, 6 percent in 2011 and 5.7 percent in 2012. The former estimate did not, however, take into account the government's austerity measures.

The Finance Ministry expects public finance deficit to reach 5.1 percent of GDP this year, 4.6 percent in 2011, 3.5 percent in 2012 and 2.9 percent in 2013. Around 2016 the government wants to achieve balanced public finances.

Last year, public finance deficit grew to 5.8 percent of GDP from 2.72 percent in 2008.

The total government debt, made up of central government debt and debts of health insurance companies, off-budget funds and local budgets, is expected by the CNB to rise to 39.3 percent of GDP this year and to 42.2 percent next year.

Last year, it made up 35.35 percent of GDP, a growth from 29.95 percent in 2008, according to Czech Statistical Office (CSU) data. Under euro adoption criteria, the total state debt must not exceed 60 percent of GDP.

According to the CNB, which announced its estimate of domestic economic development last week, GDP is to grow by 2.3 percent this year. Next year it expects a GDP rise of 1.2 percent and in 2012 an increase of 2.5 percent.