The Czech state budget ended 2024 with a deficit of CZK 271.4 billion, making it the fifth-largest in the country’s history since its founding. Prime Minister Petr Fiala and Finance Minister Zbyněk Stanjura (both ODS) presented the budget results, emphasizing that the deficit is the best since the COVID-19 pandemic. However, analysts noted that the government barely met its revised deficit target of CZK 282 billion, aided by an amendment that raised planned spending by CZK 30 billion following September’s floods.

State budget revenues totaled CZK 1.965 trillion, marking a 2.7% year-on-year increase, primarily driven by higher collections of compulsory insurance premiums and taxes. Among tax revenues, personal income tax grew the fastest. Expenditures reached CZK 2.236 trillion, up 1.6% year-on-year, with social benefits comprising the largest share at CZK 904.8 billion, including CZK 710 billion for pensions.

Capital expenditures stood at CZK 210.1 billion, maintaining last year’s level. Stanjura highlighted that CZK 15.4 billion of the budget was allocated to repairing flood damage, with the Transport Ministry alone using CZK 5.5 billion for infrastructure reconstruction.

Prime Minister Fiala commended the government for meeting its budget targets and reducing the deficit both in absolute terms and relative to GDP. He noted that the deficit as a share of GDP has dropped from over 5% when the current government took office to an estimated 2.3% in 2024.

“We inherited one of the fastest-debting economies in the EU. This year’s deficit reduction shows our progress in fiscal responsibility,” Fiala said.

Stanjura acknowledged that the floods influenced the budget outcome, adding that without them, the deficit would have been CZK 256 billion, slightly higher than the originally approved CZK 252 billion target. He attributed the deviation to increased defense spending, approved late in the year to meet NATO commitments of 2% GDP defense allocation.

Opposition leaders were unsparing in their critique. Alena Schillerová, head of the ANO parliamentary club, dismissed the budget outcome as “trivial.” She criticized the government for celebrating a deficit she described as avoidable, given the absence of pandemic-related expenses. “Raising taxes to record levels while delivering a CZK 271.4 billion deficit in a non-crisis year is cynicism of the highest order,” Schillerová said.

Economists offered a mixed assessment. While noting an improvement over 2023’s CZK 288.5 billion deficit, they highlighted risks to future budgets. David Marek, chief economist at Deloitte and an advisor to President Petr Pavel, remarked, “Although the deficit improved year-on-year, the planned deficit was exceeded due to late-year adjustments.”

Dominik Rusinko, an analyst at ČSOB, expressed caution about the 2025 budget, which targets a deficit of CZK 241 billion. “Election-year spending and an optimistic 2.6% economic growth projection could undermine the government’s plans,” Rusinko warned.

The national debt rose from CZK 3.111 trillion at the end of 2023 to CZK 3.365 trillion in 2024. The Ministry of Finance expects it to increase further to CZK 3.614 trillion in 2025. This growing debt burden has led to higher financing costs, with state debt servicing expenditures rising by CZK 20.2 billion to CZK 88.5 billion last year. These costs are forecast to climb to CZK 100 billion in 2025.

While the government highlights its commitment to fiscal discipline, challenges loom. The rising national debt, election-year spending, and potential economic slowdown may test the government’s ability to meet its fiscal targets in the coming year.

Source: CTK

The Czech Republic’s foreign trade balance in November 2024 reflected a combination of progress and challenges, as reported by the Czech Statistical Office (ČSÚ). The country recorded a trade surplus of CZK 23.6 billion, representing a year-on-year decline of CZK 4.2 billion. While certain sectors, such as motor vehicles and electrical equipment, contributed positively to the trade balance, others, including metal products and machinery, experienced significant setbacks.

A closer look reveals that the trade in motor vehicles was a major contributor to the surplus, with an increase of CZK 2.2 billion compared to the previous year. The oil and gas trade deficit also decreased by a similar amount, further bolstering the overall balance. Electrical equipment trade added another CZK 2.0 billion to the surplus, highlighting its growing importance in the country’s export portfolio.

However, these gains were offset by weaker performances in other sectors. The surplus in metalworking product trade narrowed substantially, decreasing by CZK 4.3 billion. Similarly, the trade in machinery and equipment suffered a loss of CZK 2.8 billion, while the deficit in base metals trade deepened by CZK 1.6 billion.

Trade relations with the European Union (EU) also showed signs of strain, as the surplus in foreign trade with EU countries decreased by CZK 3.9 billion year-on-year. Meanwhile, the trade deficit with non-EU countries widened slightly, increasing by CZK 0.5 billion.

On the export and import front, exports in November grew by 4.4% year-on-year to CZK 424.5 billion, while imports increased at a faster rate of 5.8%, reaching CZK 400.9 billion. The faster growth in imports compared to exports continued a trend observed throughout the year.

“Imports have once again grown faster than exports,” said Jana Mazánková, Head of the ČSÚ’s Trade Balance Department. “For instance, imports of metal products, mainly originating from Germany, Slovakia, and China, rose by almost 26% year-on-year. Additionally, imports of food products from Germany, Poland, and Spain grew by over CZK 2 billion compared to the previous year.”

On a month-to-month basis, after seasonal adjustments, exports increased by 0.5%, while imports fell slightly by 0.7%. These figures suggest a degree of stabilization in trade activity, albeit with continued volatility in certain sectors.

Cumulatively, from January to November 2024, the trade surplus reached CZK 219.1 billion, marking a significant increase of CZK 101.2 billion year-on-year. Over this period, exports grew by 4.7%, while imports rose by 2.3%, indicating a steady expansion in the country’s overall trade activity.

The November performance underscores the importance of closely monitoring sector-specific trends and trade partnerships. While sectors like motor vehicles and electrical equipment continue to demonstrate resilience, challenges in metalworking and machinery trade highlight the need for strategic adjustments to maintain a balanced trade outlook.

Source: ČSÚ