INSTANT VIEW 3-Czech budget Jan-Aug gap hits CZK 89.6 bln

                                
 PRAGUE, Sept 1 (Reuters) - The Czech central state budget
showed a 89.58 billion crown ($5.06 billion) deficit for
January-August, a sharp reversal from a 5.32 billion surplus a
year ago and a deterioration from July.
                                
 The government is aiming to keep the gap below 170 billion
crowns. The Finance Ministry forecast an overall public sector
deficit of 5.5 percent of gross domestic product in July,
although officials this week said it could hit 7.4 percent.
                                
 The Czech economy shrank by 4.9 percent year-on-year and
rose 0.3 percent quarter-on-quarter in the second quarter, and
the Finance Ministry forecasts a decline of 4.3 percent for the
whole of 2009. <CZ/ECON17> 
                                
 The original budget was built on a forecast, set a year ago,
of 4.8 percent full-year growth.
****************************************************************
KEY POINTS:
(in CZK bln)             01-08/09       01-07/09      01-08/08
 year-to-date balance    -89.58         -76.16         +5.32

(For full table, double click on................[ID:nPRA004729]

 DETAILS:
- The budget in August alone showed a 13.4 billion crown deficit
compared to deficit of 4.0 billion a year ago.
- January-August revenue was down 6.9 percent year-on-year,
while expenditure rose 6.9 percent.
- January-August revenue accounts for 57.1 percent of the annual
target. Overall expenditure for the period stands at 62.9
percent of the yearly plan.
- Tax and fee revenues fell by 11.0 percent year-on-year, due to
lower income from all main taxes -- corporate, private income as
well as the value added tax and excise taxes. 
- Revenue from social insurance fell 6.6 percent, while social
payments including pensions rose by 7.4 percent.
- The central state budget is the biggest part of the overall
public sector finances.
- In its latest forecast released on July 22, the finance
ministry saw an overall public sector deficit of 5.5 percent of
gross domestic product (GDP) in 2009 under EU-harmonised ESA-95
fiscal rules. At a press conference on Monday, Finance Minister
Eduard Janota said the gap could be as wide as 7.4 percent of
GDP.
                                
 
                                
 COMMENTARY
                                
 PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
                                
 "With the present difference between the budgeted and the
real development of tax revenue, some 190 billion crowns can be
missing in the state coffers at the end of the year. The
estimated ... 7 percent/GDP gap for this year is quite real."
                                
 "The development is alarming and should prompt politicians
to an immediate reaction, otherwise there is a threat that the
Czech Republic will have to stand in a line of countries asking
for International Monetary Fund aid."
                                
 
                                
 RADOMIR JAC, CHIEF ECONOMIST, GENERALI PPF ASSET MANAGEMENT
                                
 "Unfortunately, it is not a big surprise, mainly the drop on
the revenues side..."
                                
 "The government is trying to push through measures (to cut
the debt) that are perfectly logical but it will depend on
politicians."
                                
 "If you look at the short-term outlook... the finance
ministry has covered its needs by the euro bond issue in the
first half of the year... but a problem could be if investors
lost interest in Czech bonds due to the (poor) fiscal outlook,
or if they wanted some extra premium for it. That could lead to a
weakening of the crown."
                                
 
                                
 VOJTECH BENDA, SENIOR ECONOMIST, ING WHOLESALE BANKING
                                
 "The trend is heading to 170 to 180 billion crowns. The
fiscal stance has deteriorated. The main problem is currently
the relatively high structural deficit."
                                
 "The cyclical surplus we saw in 2006-07 and partly 2008
could not outweigh the structural deficit."
                                
 "Even if the Czech Republic could return to 3 percent growth
in 2010 or 2011, you will still see the budget deficit above the
Maastricht criteria until the government will make some changes
in the structure. Mainly it is a problem of expenditures."
                                

LINKS:
- For recent stories on the budget, click on [CZ-GVD-POL-RTRS]
or [CZ-RTRS-DBT].
- For an overview of the Czech central government budget,
Reuters 3000 Xtra users can click on the ministry's website:
                                
 http://www.mfcr.cz

- For LIVE Czech economic data releases, click on       <ECONCZ>
- Instant Views on other Czech data                 [CZ/INSTANT]
- Overview of Czech macroeconomic indicators            [CZ/ECI]

- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH]
- For Czech money markets data click on                <CZKVIEW>
- Czech money guide                                      <CZK/1>
- Czech benchmark state bond prices                   <0#CZBMK=>
- Czech forward money market rates                      <CZKFRA>

 (Writing by Jana Mlcochova; editing by Stephen Nisbet)