State budget gap grows by CZK 4bn to CZK 71.4bn in Sept

Prague, Oct 1 (CTK) - The Czech Republic's state budget deficit increased to Kc71.4bn in September from August's Kc67bn, while in September 2011 the deficit was almost Kc34bn higher, the Finance Ministry informed CTK yesterday.

State budget with a Kc105bn deficit has been approved for the whole of this year.

"Despite the expected non-fulfilment of the budget revenues, higher tax revenues collection is positive in a year-on-year comparison," the ministry said.

The lower-than-expected growth in state budget revenues was caused the most by lower VAT payments and payments from EU funds.

Expenditures fell by Kc18.4bn yr/yr, in particular thanks to some Kc13bn lower transfers of advances for regional schools and Kc9.1bn lower capital expenditures, the ministry said.

"The Finance Ministry has not lost control over the development of public finances. The September data overall offer a mixed picture but they do not signal any approaching financial catastrophe," UniCredit Bank analyst Pavel Sobisek told CTK.

This year's deficit after three quarters of the year is the lowest since the beginning of the financial crisis in 2009, he added.

The development in September alone shows a positive turnround in VAT and corporate income tax revenues, Sobisek pointed out.

While the first item still lags strongly behind the full-year plan, by the second there is a chance that the full-year plan will be surpassed.

"It seems that the development in the profitability of companies was not bad at all last year and this year's tax advances correspond to it. On the other hand, September's fall in the dynamics by social security payments is a disconcerting tendency. It may signal lower employment in the economy, he noted.

Total revenues at Kc757.1bn were Kc15.3bn (2.1 percent) higher than in the same period of 2011. The budget after changes reckons with a 7.3 percent growth.

VAT collection stood at Kc143.4bn and grew by 2.3 percent yr/yr. The budget counts on a 15.5 percent growth against 2011, mainly due to the amendment to the law on VAT which raised the lower VAT rate from 10 to 14 percent with effect as of January 1, 2012.

The lower VAT collection was caused mainly by a fall in consumption of the private sector and an extraordinary influence linked with a change in legislation last year.

As for the lower household consumption, the ministry ascribes it mainly to consumer cautiousness due to concerns about future development in the Czech Republic and Europe. Owing to this, consumers delay purchase of goods and services. Consumption is not falling significantly by goods and services with the lower VAT rate, the ministry added.

State budget deficit/surplus (Kc bn):

Jan-Sept 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
deficit/surplus -17.306 -22.551 -21.434 -80.267 -40.516 25.748 1.489 36.316 10.473 -87.296 -99.555 -105.138 -71.412

Source: Finance Ministry