(adds details, background, analyst comment)
By Jana Mlcochova
PRAGUE, Feb 16 (Reuters) - The Czech government approved a
fiscal stimulus package on Monday, a government source said,
including tax cuts and some extra spending aimed at easing the
central European country's sharply worsening economic downturn.
The Czech economy, like other export-reliant economies in
central Europe, has seen its growth and output figures plummet
and job losses rise due to slumping demand from the
recession-hit euro zone.
A finance ministry source said the plan totalled 73 billion
crowns ($3.3 billion), including some already approved measures
and 40 billion crowns in fresh cuts in social insurance taxes
and other measures, the source said.
"The impact on the government (deficit) will be at the level
of 1.9 percent," the finance ministry source told Reuters.
"The total effect of the already approved, realised, and
newly proposed measures means an impulse for the economy at the
level of 2.9 percent of GDP."
A separate government source later said the package was
approved with some additions. Prime Minister Mirek Topolanek was
expected to detail the measures at a news conference later on
Monday.
The fiscally conservative, right-of-centre Czech government
has long resisted taking any extra beefy measures to boost the
flagging economy, expected by most economists to contract
slightly this year, but the fast worsening economic outlook has
forced it to rethink the policy.
The Czechs, who hold the rotating EU presidency, have
repeatedly urged restraint among European governments on hiking
spending to climb out of the crisis and say any such measures
should be short-term.
Topolanek said on Sunday the planned measures would raise
country's public finance deficit above 3 percent of GDP this
year, complicating efforts to adopt the euro [].
Topolanek also hinted his minority, centre-right coalition's
future may hinge on the plan's approval in parliament.
Opposition Social Democrats have been critical of how the
government has been handling the crisis and propose their own
measures.
SMALL AND OPEN
The package includes few measures to boost household demand.
Analysts have said a better idea for the highly open economy,
where people buy many imported products and whose exports
account for 70 percent of GDP, was to boost the supply side.
"Authors of the package respect the fact that the Czech
economy is small and open so we can see measures tailored to
help companies in a situation when foreign demand is very low,"
said Tomas Vlk, an analyst at Patria Finance.
"Some of the measures go the right directions, meaning
alleviating the corporate sphere, supporting exports,
alleviating through tax breaks," Vlk said.
Daily Hospodarske Noviny reported on Monday the package
called for trimming social security payments, speeding up the
depreciation of cars and computers, and widening a value-added
tax write-off for the purchase of new cars.
The package aims to save 50,000-70,000 jobs. It includes a 2
billion crown capital injection for a state bank providing
credit to small-and-medium-sized enterprises, and 6.6 billion
crown subsidy for heat insulation in homes, the paper said.
"Compared to packages in other countries (there) is small
proportion of extra public expenditure. This will limit the real
influence of the package," said Pavel Mertlik, chief economist
with Raiffeisenbank in Prague.
(Additional reporting by Jan Korselt and Jason Hovet; Editing
by Jan Lopatka and Andy Bruce)
