June 8, 2020 / 5:33 PM / 2 months ago

Czechs decide to raise 2020 budget gap again to $21 billion: CTK agency

PRAGUE (Reuters) - The Czech government has decided to raise the 2020 central state budget deficit to 500 billion crowns ($21.3 billion) from 300 billion, CTK news agency said on Monday.

The increase needs the approval of parliament.

The deficit had already been raised twice from the original plan of 40 billion crowns due to the economic slump caused by the coronavirus. The central state budget has borne the brunt of a drop in revenue and jump in spending in the public sector.

The 500 billion threshold would mean an overall public budget deficit getting into high single digits relative to gross domestic product, depending on how much nominal GDP falls this year from last year’s 5.6 trillion crowns.

Public and private sector analysts polled by the Finance Ministry in May expected a GDP drop of around 7.6% in real terms this year, followed by a 5.8% growth next year.

The central European country had driven government debt down in the past years to 30.8% of GDP in 2019 versus an EU average of 79.3%, giving the government scope to borrow in the market for the time being.

It has sold record volumes of bonds in the past few months to build up a cash reserve.

Finance Minister Alena Schillerova had earlier signalled that a third increase in the 2020 gap would be necessary to keep the economy going.

Reporting by Jan Lopatka; Editing by Mark Heinrich

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