Czech Finance Ministry Submits 2025 Budget Draft Aiming for 9% Deficit Reduction, Reports Reuters

PRAGUE (Reuters) – The Czech Finance Ministry has presented a budget draft for 2025, indicating a 9% reduction in the projected deficit while aiming to facilitate record levels of investment and reduce the fiscal gap to approximately 2% of the gross domestic product (GDP).

The draft, submitted just before a midnight deadline on Saturday, outlines a deficit of 230 billion crowns (about $10.2 billion), a decrease from the previous target of 252 billion crowns and a forecasted 2.5% GDP deficit for this year.

"We have prepared a budget draft for next year that includes the highest historical allocation for investment, while simultaneously reducing the deficit to around 2% of GDP," stated Prime Minister Petr Fiala on a social media platform.

This budget proposal maintains defense spending in line with the country’s NATO commitment of 2% of GDP, proposes higher salaries for teachers, and allocates significantly more funds for investments, according to statements from 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 the next year. This tax has primarily impacted the electricity producer CEZ and is scheduled to expire at the end of 2025.

Projected figures include a 146.1 billion crown increase in income and a 124.1 billion crown rise in spending.

The ministry anticipates a rebound in economic growth to 2.7% next year after reducing this year’s forecast to 1.1%, reflecting a gradual recovery from a surge in inflation that affected households.

The government will review the budget, which may involve reallocating funds among various departments, before finalizing and submitting it to parliament by the end of September.

The Pirates party, a junior member of the ruling five-party center-right coalition, expressed its intention to seek additional funding for housing, labeling the current draft as unacceptable.

Since the deficit reached a record high of 420 billion crowns in 2021, largely due to the impacts of the global COVID pandemic, the Czech government has committed to a path of fiscal consolidation. The rise in energy prices following Russia’s invasion of Ukraine in 2022 further escalated aid spending for affected individuals and businesses.

The budget deficit for 2023 stood at 288.5 billion crowns.