PRAGUE, Aug 15 (Reuters) - The Czech public finance deficit may jump to 7 percent of gross domestic product next year if proposals to boost revenue and cut spending are not adopted, Finance Minister Eduard Janota told a radio station on Saturday.
The Czech Republic, like other states in central Europe, has been struggling to rein in a widening budget gap as its export-driven economy has dived into its deepest recession since the early 1990s due to dwindling demand in western Europe.
'If changes on the income side and mainly on the spending side are approved by the Chamber of Deputies and the Senate, the budget deficit could be slashed to a reasonable level, somewhere around 5 percent of GDP in terms of public budgets,' Janota said.
'But if we were passively accepting the current situation, then we move somewhere at the 7 percent level,' he said in an interview with Radio Cesko.
The central state budget deficit, a key part of public finances, could therefore balloon to 256 billion crowns ($14.21 billion) next year, above the planned 170 billion, Janota said.
The government is due to discuss Janota's proposals on how to keep the budget deficit under control on Aug. 24. But he was sceptical that the proposed cuts would be cleared by the lower house due to a general election.
'We are close to the election and creativity or let's say certain populism of politicians is rising,' Janota said. 'I expect that a vast majority of them would be very, very reserved and rather criticise or to belittle (the proposals).'
Janota said last month the budget deficit would exceed 200 billion crowns in 2010 following a downward revision to the ministry's economic forecast.
The ministry, which sees the economy growing 0.3 percent in 2010 after a record drop of 4.3 percent this year, did not give its 2010 fiscal gap forecast in its quarterly update in July.
It expects the deficit to rise to 5.5 percent of GDP this year from 1.5 percent in 2008. The central bank said on Friday that the shortfall would swell to 6.4 percent of GDP in 2010, above a euro adoption threshold of 3 percent.
Janota said the ministry may also propose cuts in mandatory spending, as well as delaying the reduction of corporate taxes to 19 percent from 20 percent and raising value added tax and social insurance caps.
Mandatory spending such as pensions and welfare is the key issue ahead of the early general election on October 9-10. It accounts for 80 percent of the overall budget spending.
(Reporting by Martin Dokoupil; Editing by Victoria Main) ($1=18.02 Czech Crown) Keywords: FINANCIAL CZECH/BUDGET (prague.newsroom@thomsonreuters.com; Reuters Messaging: martin.dokoupil.reuters.com@reuters.net; +420-224 190 477) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The Czech Republic, like other states in central Europe, has been struggling to rein in a widening budget gap as its export-driven economy has dived into its deepest recession since the early 1990s due to dwindling demand in western Europe.
'If changes on the income side and mainly on the spending side are approved by the Chamber of Deputies and the Senate, the budget deficit could be slashed to a reasonable level, somewhere around 5 percent of GDP in terms of public budgets,' Janota said.
'But if we were passively accepting the current situation, then we move somewhere at the 7 percent level,' he said in an interview with Radio Cesko.
The central state budget deficit, a key part of public finances, could therefore balloon to 256 billion crowns ($14.21 billion) next year, above the planned 170 billion, Janota said.
The government is due to discuss Janota's proposals on how to keep the budget deficit under control on Aug. 24. But he was sceptical that the proposed cuts would be cleared by the lower house due to a general election.
'We are close to the election and creativity or let's say certain populism of politicians is rising,' Janota said. 'I expect that a vast majority of them would be very, very reserved and rather criticise or to belittle (the proposals).'
Janota said last month the budget deficit would exceed 200 billion crowns in 2010 following a downward revision to the ministry's economic forecast.
The ministry, which sees the economy growing 0.3 percent in 2010 after a record drop of 4.3 percent this year, did not give its 2010 fiscal gap forecast in its quarterly update in July.
It expects the deficit to rise to 5.5 percent of GDP this year from 1.5 percent in 2008. The central bank said on Friday that the shortfall would swell to 6.4 percent of GDP in 2010, above a euro adoption threshold of 3 percent.
Janota said the ministry may also propose cuts in mandatory spending, as well as delaying the reduction of corporate taxes to 19 percent from 20 percent and raising value added tax and social insurance caps.
Mandatory spending such as pensions and welfare is the key issue ahead of the early general election on October 9-10. It accounts for 80 percent of the overall budget spending.
(Reporting by Martin Dokoupil; Editing by Victoria Main) ($1=18.02 Czech Crown) Keywords: FINANCIAL CZECH/BUDGET (prague.newsroom@thomsonreuters.com; Reuters Messaging: martin.dokoupil.reuters.com@reuters.net; +420-224 190 477) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.