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Czech Finmin drafts revised budget, higher deficit

Published 01/25/2009, 06:36 AM
Updated 01/25/2009, 06:40 AM

PRAGUE, Jan 25 (Reuters) - The Czech Finance Ministry has drafted a revision to the 2009 state budget that anticipates higher deficits due to a fall in economic growth, minister Miroslav Kalousek said on Sunday.

Kalousek said on live television he would ask the cabinet on Monday to approve the revision, which sees a gap of between 50 billion and 75 billion crowns ($2.32-3.48 billion), based on economic growth of 1 to 3 percent.

Kalousek said the latest ministry forecast was for growth of 1.4 percent this year.

"If growth is around 1 percent, the deficit will be around 75 billion, and we will be around the limit of 3 percent of gross domestic product," Kalousek said.

The EU allows its member states to run deficits of up to 3 percent of gross domestic product, a limit that a number of countries in the euro zone are expected to break this year.

The central state budget was approved by parliament with a 38 billion crown gap.

The Czech Republic did not suffer the first-round effects of the financial crisis in the banking sector but has been hard hit by a slump in demand in the euro zone, the key Czech export market.

The revisions are in line with Kalousek's past comments on a need to rework the budget, which was based on growth of 4.8 percent this year.

Kalousek said that with no government action, the budget gap would rise to 90-110 billion crowns, but he stuck to the government line that the government should not run up debt for a short-term fiscal stimulus. The European Commission forecast this week the Czech economy would grow 1.7 percent this year, remaining among the club's best performers. (Reporting by Jan Lopatka, editing by Will Waterman)

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