Czech Finance Ministry Submits 2025 Budget Draft

PRAGUE (Reuters) – The Czech Finance Ministry has submitted a 2025 budget draft to the government, aiming for a 9% lower deficit. This draft intends to bring record investments while narrowing the fiscal gap to approximately 2% of GDP.

The budget draft, submitted just before a midnight deadline on Saturday, anticipates a deficit of 230 billion crowns (approximately $10.2 billion), a reduction from the planned 252 billion crowns and the forecasted 2.5% of GDP this year.

Prime Minister Petr Fiala stated on the X platform that they have crafted a budget with historically high investment funding while simultaneously cutting the deficit to around 2% of GDP.

The draft maintains defense spending at the NATO commitment level of 2% of GDP, plans for higher salaries for teachers, and allocates tens of billions more for investments, according to finance ministry and government officials.

Finance Minister Zbynek Stanjura indicated last month that he would not advocate for an early termination of the windfall tax on energy companies and banks for next year. This tax primarily impacts electricity producer CEZ and is set to expire at the end of 2025.

The budget forecasts an increase of 146.1 billion crowns in income against a 124.1 billion crowns rise in spending. Additionally, the ministry anticipates economic growth to rebound next year to 2.7% after revising its outlook for this year down to 1.1%, amidst a slow recovery from the inflation surge impacting households.

The government will review the budget and may adjust allocations between departments before presenting a final version to parliament by the end of September.

The Pirates Party, a junior member of the ruling coalition, has expressed they will seek increased funding for housing, deeming the current draft unacceptable.

Since facing a record deficit of 420 billion crowns in 2021 post-COVID pandemic and additional economic burdens from the energy price spikes following Russia’s Ukraine invasion in 2022, the Czech government has adopted a steady consolidation strategy.

The deficit for the year 2023 is projected to reach 288.5 billion crowns.

($1 = 22.6480 Czech crowns)