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Government Seen At Risk Of Missing Its Fiscal Deficit Target

CZECHIA
  • Finance Minister Zbynek Stanjura pointed to the need to find more savings on top of the government's fiscal consolidation package after Czechia's YtD budget deficit ballooned to record-breaking levels last month. The official said that seasonality provides partial explanation of disappointing data released yesterday and the tide should turn in the second half of the year, but a further tightening of belts is needed nonetheless. Analysts have warned that the government has limited options for limiting spending this year, as the state budget has already been approved. One option would be cutting the operational expenses of ministries. Stanjura is expected to present his proposals next week.
  • CSOB write that yesterday's budget numbers "surprised rather negatively" even as "May is traditionally a weak month." They suggest that this year's deficit will likely approach CZK400bn versus their current estimate of CZK360bn and the government's original CZK295bn forecast. At the same time, CSOB believe that the CNB will pay more attention to the government's effort to rein in spending over the next two years, despite near-term problems. Komercni banka said that the risks to their CZK315bn deficit forecast are skewed towards an even deeper shortfall, while J&T Banka echoed the view that the government may miss its current budget deficit target.
  • President Petr Pavel will meet Prime Minister Petr Fiala and opposition leader Andrej Babis this afternoon.
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