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Skip Navigation LinksHome :: Markets/asset classes :: Central and Eastern Europe :: State budget surplus grows almost 13-fold y/y in Jan-Aug.

Wednesday, September 3, 2008

State budget surplus grows almost 13-fold y/y in Jan-Aug.





State budget surplus grows almost 13-fold y/y in Jan-Aug. The state budget surplus amounted to SKK 5.1bn in Jan-Aug, growing from a SKK 401.7mn surplus for the same period of the previous year, the finance ministry reported. The surplus accounted for some 0.3% of the annual GDP projection in our calculations. These latest budget developments continue the trend of fiscal consolidation since the beginning of the year, based on stable revenue growth and expenditure restraint. Specifically, budget revenues were up by 5% y/y to SKK 216.7bn for the period and reached 62% of the plan for the year. Their increase was based strongly on higher inflow from EU funds, which climbed by 36.6% y/y but still were roughly just half of the annual target. Interestingly, these inflows did not translate into higher capital outlays as these remained excessively constrained in order to make room for higher social spending and for continued fiscal consolidation. Otherwise, tax revenues were up by 4.3% y/y, reaching 64% of the plan for the year. Their collection was, in our opinion, mainly affected by the expansion of the scope of the preferential VAT rates since the beginning of the year. Consequently, revenues from VAT or the main source of state budget financing stagnated and rose by just 2% y/y for the period. Revenue from corporate income tax thus was the key factor behind tax revenue growth in Jan-Aug as it climbed by 9.5% y/y. At the same time, budget spending increased at a more moderate pace of 2.8% y/y, standing at SKK 211.6bn for the period. It represented 56% of the annual ceiling. Fiscal discipline was achieved at the expense of capital expenditures, which dropped by 12% y/y while current spending rose by 4.4% y/y. The government projects fiscal deficit of 2.2% of GDP this year.







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