Czech finance ministry submits 2025 budget draft to cut deficit by 9%

PRAGUE (Reuters) – The Czech Finance Ministry has submitted a 2025 budget draft with a 9% lower deficit to the government, saying it will bring record investments while narrowing the fiscal gap to around 2% of gross domestic product.

The budget draft, submitted at a midnight deadline on Saturday, counts on a deficit of 230 billion crowns ($10.2 billion), down from a planned gap of 252 billion crowns and forecasted fiscal gap of 2.5% of GDP this year.

“We have prepared a budget draft for next year in which there is the most money historically for investment and at the same time we are cutting the deficit to GDP to a level around 2%,” Prime Minister Petr Fiala said on the X platform on Sunday.

The draft includes maintaining defence spending at the country’s NATO commitment of 2% of GDP, higher salaries for teachers, and tens of billions more for investments, the finance ministry and government officials said.

Finance Minister Zbynek Stanjura said last month he would not propose an early end to a windfall tax on energy companies and banks next year, which has mainly fallen on electricity producer CEZ and is due to expire at the end of 2025.

The budget forecasts a 146.1 billion crown rise in income and 124.1 billion crown spending increase.

The ministry has forecast economic growth to pick up next year to 2.7% after cutting its outlook for this year to 1.1%, amid a slow recovery from an inflation surge that hit households.

The government will debate the budget, during which money could be shifted between departments, before submitting a final version to parliament by the end of September.

The Pirates party, a junior member of the ruling five-party centre-right coalition, told CTK news agency on Sunday it would seek more money for housing, calling the current draft unacceptable.

The Czech government has put itself on a steady consolidation path since the deficit hit a record 420 billion crowns in 2021 after the global COVID pandemic, while energy price surges after Russia’s invasion of Ukraine in 2022 increased aid spending for people and firms affected.

The 2023 budget deficit reached 288.5 billion crowns.

($1 = 22.6480 Czech crowns)