Czech PM buoyant despite slowdown

21 May 19

The Czech government has dismissed concerns about a slowing economy and growing spending commitments and says it will stick to a planned deficit target.

Czech PM Andrej Babis Prime minister Andrej Babiš on Monday described the country’s finances as “excellent” saying there was no reason to worry about growth slowing, Reuters reported.

Babiš said finance ministry proposals for next year’s budget – due to be presented to parliament next week – set the central government deficit at 40 billion crowns (£1.36bn), and officials say the country is on track to meet this target.

“I just want to confirm that the Czech Republic is doing excellent, that we have one of the best results in Europe, ours is one of the most stable economies, there is growth and we continue in decreasing the state debt as measured against GDP,” Babiš told journalists.

While the Czech Republic’s public finances have performed strongly compared to some other European Union economies with a fiscal surplus since 2016, growth has wobbled.

The finance ministry predicts a deficit in 2020 and earlier this year cut its outlook for growth in 2019 to 2.4%, down from nearly 3% in 2018, mainly due to slowing industrial production and external demand.

The European Commission has also revised down its growth expectations for the Czech Republic in 2020 to 2.4%, from a forecast of 2.7 % earlier this year.

The Babiš government has been criticised by some economists for its spending plans – with the prime minister pledging to raise public sector wages and pensions – and its increased commitments have pushed ministers to seek savings in 2020.

State spending next year is forecast to be 1.59 trillion crowns and revenues to be 1.55 trillion crowns, and Babiš told journalists that ministries were identifying the necessary savings to stay within budget.

The Czech prime minister’s comments come amid warnings by a senior adviser to the German government of another European financial crisis.

Dr Lars Feld, a member of the German Council of Economic Experts, has pointed to Italy – which is struggling to avoid a recession as it grapples with high public debt – to voice fears about contagion in Europe’s banking system.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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