Introduction
The Czech Republic’s budget deficit reached CZK 126 billion in April 2025. Although this marks an increase compared to March, it represents a notable improvement over the same period in 2024, when the deficit stood at CZK 153 billion. According to Finance Minister Zbyněk Stanjura, the better outcome stems from a 2% GDP growth in Q1 and stronger tax collection.
Improvement Over 2024: Role of Economic Growth
The year-over-year improvement of CZK 27 billion is primarily due to tax reforms and a rebound in economic activity. The recovery package introduced in 2024 helped boost revenues while keeping public spending under tighter control. The Czech Statistical Office confirmed the economic expansion, which contributed to improved fiscal outcomes.
Tax Revenues on the Rise: Personal, Corporate, and VAT
State budget revenues increased by 5.2% year-on-year by the end of April, totaling an additional CZK 30.8 billion.
- Personal income tax (PIT) revenue rose by 13%, driven by wage growth.
- Corporate income tax (CIT) increased by 6%.
- Value-added tax (VAT) grew by 8%, reflecting stronger household consumption.
These improvements were partly due to legislative changes in 2024, including adjustments to VAT rates and new rules on the taxation of certain social benefits.
Spending Grew Slightly
Despite higher revenues, expenditures also grew, but only by 0.5% year-on-year. Key increases included:
- Pensions (+CZK 3.4 billion), due to indexation and early retirement adjustments.
- Education, with territorial transfers up by 8%.
- Social benefits, particularly unemployment, sickness, and assistance allowances.
On the other hand, energy subsidies and public investment dropped by CZK 11.4 billion as emergency support measures phased out.
EU Funds and Social Contributions
There was a CZK 7.1 billion decline in EU funding, which was only partially offset by a CZK 7.2 billion increase in social contributions. This balance reflects a more conservative budget policy, focused on stabilizing public finances.
Conclusion
Although the Czech Republic’s budget deficit reached CZK 126 billion in April 2025, the trend compared to the previous year is encouraging. A combination of GDP growth, rising tax revenues, and reduced extraordinary expenditures points toward gradual fiscal consolidation. Despite ongoing macroeconomic uncertainties, the outlook for Czech public finances is more optimistic than in 2024.
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