Saturday, April 10, 2021
- Advertisement -
Home Breaking News Analysts: The problem is not the amount of debt, but its significant...

Analysts: The problem is not the amount of debt, but its significant growth

Updates: 30.03.2021 12:23

Prague – The amount of the state debt itself is not a problem in the international context. Debt is rising due to the effects of the pandemic in most developed countries. However, a significant increase in debt in a relatively short time can be a complication. This could lead to mistrust of the financial markets and consequently to more expensive debt financing. This follows from the statements of analysts contacted by ČTK.

According to information published by the Ministry of Finance, the state debt should exceed 2.5 trillion crowns this year and three trillion crowns in 2023. The state debt exceeded the limit of two trillion crowns last year, when it rose by 410 billion crowns to 2.05 trillion crowns. The increase was mainly due to the issuance of government bonds, among other things to cover the deficit of last year’s state budget, which was the highest since the establishment of the Czech Republic due to the effects of the pandemic with 367.4 billion crowns.

“We can agree with the Ministry of Finance that the amount of the Czech government debt, either in Czech crowns or in relation to GDP, is not a warning, especially in comparison with other – mostly indebted – European countries. Nor can anything be objected to. against deep public finance deficits in 2020 and 2021, as stabilizing the economy during emergencies is one of the main tasks of fiscal policy as such, “said Raiffeisenbank analyst Vít Hradil.

However, according to him, the development of public finances is on a dangerous trajectory that can destabilize them. “Although rating agencies are currently lenient with the Czech Republic, knowing that it has a good starting position and its crisis deficits do not deviate in any way from comparable countries, they expect a credible plan from the Czech government to consolidate budgets in the coming years. “In general, the celebration of the still internationally solid position of Czech debt can be seen as a dance aboard the Titanic heading for the glacier,” he said.

- Advertisement - analyst Radim Dohnal pointed out that government debt in the Czech Republic and elsewhere in the developed world has been growing for a long time. “It is due to coronavirus and often also due to pure populism. The Czech Republic is no exception in this,” he said. He added that measures such as the abolition of super-gross wage taxation, the abolition of the acquisition tax, the abolition of the EET and the huge increase in payments for state insured persons are likely to have a greater impact on the rapid increase in debt. “These are all steps that are very likely to be irreversible and will be very difficult for the new government politically,” he added.

Even according to the provincial director of 4fin, Vratislav Jůza, the problem is not so much the absolute amount of debt, but the unprecedented rate of debt growth relative to GDP. “We owe this to our populist government, which has been running a marketing campaign for virtually the entire election period. As a result, the state budget deficit is increasing by tens of billions of crowns overnight. already 10-year government bonds of the Czech Republic bear a higher yield than, for example, Greek bonds, “he said. According to him, this will lead to more expensive servicing of the state debt, because the state will have to pay higher interest rates and will not be able to use the money in more necessary places, where they would find better use.

government economy analysts budget MF responses debt



Please enter your comment!
Please enter your name here

- Advertisment -

Most Popular

Recent Comments