Czech Public Debt Among Lowest In EU, Though Predicted To Rise Rapidly In Coming Years
According to the Supreme Audit Office, in 2020, the Czech Republic’s public debt exceeded CZK 2 trillion for the first time, yet it is still among the lowest in the EU. However, experts anticipate the country’s debt to rise rapidly and substantially in the coming years. Photo Credit: KK / BD.
Czech Rep., Aug 12 (BD) – According to the Supreme Audit Office (NKÚ), Czech public debt exceeded CZK 2 trillion for the first time in 2020, as the Czech economy, like others, was affected by the Covid-19 pandemic. However, despite this, public debt in the Czech Republic is still among the lowest in the EU, with only three EU countries reporting lower public debt. However, NKÚ warns that the anticipated rapid increase of public debt in coming years, forecast to be the second fastest in the EU, presents a significant risk to the Czech economy.
“During audits, NKÚ regularly encounters inefficient spending of state funds,” said NKÚ President Miloslav Kala. “I am convinced that if we were consistently looking for savings, we would be able to return the CZK 20 billion a year to the budget needed to stop before the debt brake limit.”
The state budget deficit limit has been increased three times during the pandemic, to CZK 500 billion, and the deficit itself had reached a record high of CZK 367.4 billion by the end of 2020. However, according to NKÚ, only CZK 218 billion of this extra spending was directly related to the pandemic; the auditors found that the Ministry of Finance included some expenditures among pandemic costs which were not directly related to the pandemic, such as a one-off contribution to pensioners, debt relief for selected hospitals, and an increase in subsidies for food self-sufficiency.
Overall, the economic downturn in the Czech Republic was 5.6%, slightly better (0.5pp) than the EU average. The downturn was less severe than expected, mainly due to the recovery of industry in the second half of 2020.
Compared with its five regional neighbours (Germany, Austria, Slovakia, Poland, Hungary), the Czech Republic spent the second lowest amount of money on direct aid during the pandemic, at 5.4% of GDP. However, the country approved 15% of GDP for indirect measures, behind only Germany (28%).