ČT: FinMin to cut GDP growth outlook for 2013 to 0.7%

Prague, Oct 28 (CTK) - The Czech Finance Ministry will cut its outlook of gross domestic product (GDP) growth for 2013 to 0.7 percent from the current 1 percent, Deputy Finance Minister Ladislav Mincic told the Czech Television yesterday.

Finance Minister Miroslav Kalousek also said yesterday that performance of the Czech economy will be worse in 2013 than the Finance Ministry had expected in its latest forecast.

However, the economy will not plunge into recession, but grow by several tens of percent, Kalousek said in a discussion programme broadcast by the Prima Family television.

In its forecast released in July, the Finance Ministry estimated that the economy would expand by 1 percent in 2013.

"The figures are worsening, but not dramatically. The growth will amount to tens of percent," Kalousek said.

The outlook will be worse owing to lower value added tax (VAT) collection and lower insurance revenues, for example, according to Kalousek.

The worsening of the forecast will affect the new draft of the state budget, Kalousek said.

Mincic said the drop in GDP growth by around 0.3 percentage point will mean a fall in the state's tax revenues of around Kc10bn.

The Finance Ministry will make public the new economic forecast on October 31. The document will influence the new state budget draft for next year which Kalousek is to present to members of the lower house of the parliament by November 23.

The original budget draft was returned to the government for redrafting by the Chamber of Deputies, the the parliament's lower house, on Wednesday following Kalousek's request.

Kalousek asked deputies to return the draft owing to uncertainty about whether the government's package of stabilisation measures will or will not be approved in the lower house. The measures include a hike in VAT rates by 1 percentage point to 15 and 21 percent, for example.

The new budget draft will reckon with a Kc100bn deficit, like the one returned to the government, but its revenues will be Kc20bn to Kc25bn lower, Kalousek said. Expenditures will fall proportionally to the drop in revenues.

The deficit will not exceed 3 percent of GDP, according to Kalousek.

Kalousek expects that all ministries will have to cut their spending as a result. Research and development, regional education as well as the State Transport Infrastructure Fund will receive less money, he said.

The returned draft counted on a real economic growth of 1 percent, lower inflation and slightly higher unemployment than this year.

Revenues of the proposed budget were to increase by around Kc200m compared with the budget approved for this year to Kc1,084.9bn. Expenditures were to drop by Kc4.8bn to Kc1,184.9bn.

The deficit of the budget was to fall by Kc5bn against the plan for this year to Kc100bn.