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Czech PM would allow higher 2020 budget deficit if slowdown worsens

PRAGUE (Reuters) - The Czech government could allow the 2020 central state budget deficit to grow beyond a planned 40 billion crown (1.34 billion pounds) gap to boost investments if a slowdown worsens, Prime Minister Andrej Babis told Czech Television on Wednesday.

Babis' government is planning higher spending in the 2020 budget for pension and public sector salaries and new investment while keeping the deficit target unchanged from 2019.

Overall public finances, which include the budget along with regional governments and the health insurance system, should end in a slight surplus, according to Finance Ministry forecasts.

The ministry predicts growth slowing to 2.0% in 2020 from 2.5% seen in 2019.

Babis told the state broadcaster that a bigger central state budget gap would be allowed if more investment was needed.

"If the economy slows and the private sector does not invest as much as before, then we will have to compensate for that," Czech TV cited him as saying.

The economy has maintained growth, driven largely by strong domestic consumption, but it is predicted to lose some steam next year as weakness abroad, especially in its main trading partner Germany, dents exports.

The Czech Republic has been one of the best fiscal performers in the European Union in recent years. But spending rises from Babis' government have been criticised by many economists and the opposition for leaving little wriggle room in budgets during times of downturn.

The budget showed a 38.6 billion crown deficit at the end of November, the deepest gap for the 11-month period since 2014. Finance Minister Alena Schillerova has said the full-year deficit could end at around 30 billion crowns.

The ministry is due to release 2019 budget data on Friday.


(Reporting by Jason Hovet; Editing by Alison Williams)