A Looming Financial Crisis in the Czech Republic
|Author(s):|| doc. Ing. Ondřej Schneider MPhil., Ph.D., Štěpánek, Pavel|
|Type:||Chapter in book|
|ISSN / ISBN:||ISBN: 0-7923-7828-8|
|Published in:||in: Dabrowski M., Rostowski, J.(eds.): The Eastern Enlargement of the EU|
|Publishing place:||Kluwer Academic Publishers|
|Abstract:||This paper analyzes Czech fiscal policy, its development, its outlook and its main flaws. We confirm the precarious condition of Czech public budgets. The share of revenues in GDP is lagging behind expenditures that are set to rise. The easy cuts in expenditures have already been made, social expenditures swell as the population ages, and past debts are slowly maturing. Moreover, hidden risks, implicit in the system of public finances during the transition period, are becoming ever more apparent. Since the financial capacity of the budget is overburdened by social commitments, governments try to find ways in which functions vital for the completion of the transition can be carried out while their financing does not take the form of instant cash outlays. All together, we foresee deficits of about 5% of annual GDP in the coming years. Public debt would therefore balloon to roughly 60% of GDP within a decade.
We then proceed with a more detailed discussion of the main revenue and expenditure programs of Czech public budgets. We then propose some forecasts as to how the budget may evolve in the medium term. As we have already indicated, growing importance is given to off-budget institutions and thus we enrich our discussion with a detailed description of their development and of their eventual impact on the public accounts. We conclude with a brief and admittedly incomplete reform proposal for the Czech public budgets' design and execution.