Czech Republic: Fiscal stance stays only slightly looser – ING

FXStreet Insights Team FXStreet

ING analysts Frantisek Taborsky and David Havrlant say Czech fiscal policy has loosened only marginally after the election, with the public finance deficit seen at 2.2% of GDP in 2026 and risks tilted higher. They highlight that the key test will be next year’s budget, when the new government fully shapes fiscal policy and related legislative changes.

Deficit seen edging higher with risks

"The Czech public finance deficit ended last year at 2.0% of GDP and is expected to be 2.2% this year, according to the Ministry of Finance estimates, although the state budget is only at the beginning of the legislative process."

"While the elections brought a change of government, we have seen only a slight loosening of fiscal policy and pessimistic market expectations have not been fulfilled."

"The main test, however, will be next year's budget, when the new government will have full control over fiscal policy and the changes discussed in the legislative process."

"In our forecast, the state budget cash deficit this year is broadly in line with the Ministry of Finance’s projections – but due to arms contracts and unclear EU flow, we see an upside risk of a 2.2% public finance deficit (ESA methodology)."

"Fiscal policy has remained just slightly looser after the election; the deficit is expected to sit at 2.2% of GDP this year, with upside risks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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FXStreet Insights Team

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