Czech government approved the 2013 state draft budget with deficit at 2.9 percent of GDP. The budget bill, however, is based on a tax hike that the government did not succeed to push through the lower house. The budget draft, to be submitted to the parliament by the end of September, assumes a public deficit of CZK 100bn (€4bn), with public spending foreseen at CZK 1.18 trillion and revenues at 1.08 trillion.
The right wing government may find it difficult to win enough support for its tax bill in the parliament, which increases VAT by one percent to 15 and 21 percent, a move that it believes would produce the higher tax revenues it needs. The Czech Republic managed to produce growth of 1.7 percent in 2011, but has slid into recession over the course of 2012.
