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UPDATE 1-Czech FinMin:IMF fcast would lead to bigger deficit

Published 04/23/2009, 05:34 AM
Updated 04/23/2009, 05:40 AM

* GDP drop seen by IMF would push budget gap over CZK 150 bn

* Finance Minister sees smaller GDP drop, proposes savings

(adds finmin quote, background)

PRAGUE, April 23 (Reuters) - The new Czech government cannot keep the central state budget deficit under 150 billion crowns ($7.27 billion) this year and next, as proposed, if a gloomy IMF economic forecast proves correct, outgoing Finance Minister Miroslav Kalousek said on Thursday.

The International Monetary Fund predicted on Wednesday that Czech gross domestic product would sink 3.5 percent this year, deeper than official Czech forecasts, as recession in the euro zone hits the export-dependent economy.

Kalousek, who leaves office with the rest of the cabinet on May 9, said he had proposed to incoming Prime Minister Jan Fischer measures that would help to keep the deficit below the 150 billion crown mark -- provided the economic drop is not as deep as the IMF predicts.

"I gave the prime minister some assumptions that would make it possible that this and next year's budget gap is kept below 150 billion, of course assuming that the IMF forecast is not fulfilled," Kalousek told reporters. "If it were according to the IMF prognosis, then of course it is not possible."

The central state budget is the main part of the overall fiscal system. Kalousek predicted earlier this week the overall public sector deficit would reach 4.5 to 5 percent of GDP this year.

Kalousek said a plunge in budget revenues due to the economic crisis could lead to a gap of up to 180 billion crowns, but it was possible to keep it below 150 billion.

He reiterated his view earlier this week that he expected the economy to contract by up to 2 percent, the same as assumptions of the Czech central bank.

Fischer is forming a cabinet of technocrats to lead the country towards an early election planned for October after the centre-right cabinet led by Mirek Topolanek lost a parliamentary no-confidence vote in March. The candidate for the new finance minister is Tomas Uvira, a non-partisan head of the ministry's privatisation and assets department. (Reporting by Jan Korselt, writing by Jan Lopatka; editing by David Stamp)

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