Notifications of the government deficit and debt

The notification of government deficit and debt is compiled for past four years as a rule and submitted by each member state of the EU twice a year, regularly at the close of March and September, including a projection for the current year. The calculation of the aggregates requested relies on the methodology of the European system of national accounts (ESA 95). Pursuant to the Maastricht criteria, the deficit and the cumulated debt should not exceed 3% of GDP and 60% of GDP, respectively.

	Unit	Year
		2002	2003	2004	2005
Net borrowing (deficit) of general government (in current year)	CZK bn	-166 787	-170 558	-79 869	-76 695
General government consolidated gross debt (at end of year)	CZK bn	702 324	774 989	855 102	901 330
Gross domestic product (GDP)	CZK bn	2 442 172	2 581 258	2 790 326	2 956 125
General government deficit in % of GDP	%	6,83	6,61	2,86	2,59
General government debt in % of GDP	%	28,76	30,02	30,65	30,49

The government deficit/surplus and the government debt reflect the financial performance of all institutional units classified to the general government sector – they are governmental departments, territorial self-governing units, some semi-budgetary (subsidized) organizations, state-owned and other extra-budgetary funds (e.g. National Property Fund, Land Fund, Support and Guarantee Agricultural and Forestry Fund and Vine-grower Fund), Railway Infrastructure Administration, transformation institutions, public universities, and health insurance corporations.
 
Government deficit/surplus refers to net borrowing (-) or net lending (+) including interest on swap transactions. It shows the ability of the general government sector to finance other entities (+) or the need of the general government sector to be financed (-).
 
Government debt includes, by definition, obligations of the general government sector resulting from currency emissions (not applicable to the CR), received deposits, emitted securities other than equity (except for financial derivatives), and received loans.
 
The Czech Statistical Office compiles the requested indicators for past years (2002-2005 in this case). The data are gradually refined, depending on the compilation and major revisions of annual national accounts and on methodological changes made on account of adjustments to respective EU regulations. Besides, they reflect changes made based on recommendation of Eurostat (laid down in the Government Deficit and Debt Manual), recommendations set out in the conclusions of the external mission or implemented during the process of compiling notifications (for Eurostat, Section C3).
 
The data shown in the table above were sent to the European Commission and Eurostat within the scope of spring notification on 31 March 2006. In comparison with the autumn notification 2005, the data are based on more detail information on government transactions and they respect new recommendations of Eurostat concerning especially the method of recording government guarantees and the allocation of FISIM (Financial Intermediation Services Indirectly Measured).
 
While preparing government deficit and debt notification in 2003, the Czech Statistical Office adhered strictly to the then recommendation of a mission of experts of Eurostat, European Central Bank and Ecofin and included the guarantee of CZK 160 billion provided to the CSOB for the reason of takeover of the Investment and Post Bank. Before the September notification 2005 was sent, the same mission met in Prague and did not change the conclusions and recommendations from 2003. The mission only declared that the guarantee for the IPB and the method of its recording in the government deficit and debt need further examination. In spite of that, in September Eurostat expressed reservations about the quality of statistical data related to the state guarantee. As late as January 2006 the Czech Statistical Office received a statement of Eurostat saying that the state guarantee should be excluded from the impact on government deficit in 2003 and from government debt in 2003, 2004 and 2005 (and as a contingent liability also from the government balance sheet).
 
An important adjustment to the time series since 2002 is the allocation of FISIM into government transactions and simultaneously into GDP calculation. GDP, as a follow-up to data published on 9 March 2006, is adjusted for the impact of allocation of FISIM for the entire national economy. The full time series since 1995 will be published on 31 May 2006.
 
The estimated levels of government deficit and debt in the March notifications for the previous year are always based in part on preliminary information combined with the application of extrapolation methods and expert guesses.
 
The Ministry of Finance is responsible for the projection of government deficit and debt for current year (now 2006) and also for its publication.
 
Statement of the European Commission can be expected in the second half of April 2006.
 
 
Prague, 3 April 2006