A tax income windfall from a robust economy and past tax hikes will enable the Czech Republic to meet its budget target for the election year of 2006 without extra spending cuts, according to the country's euro road map.
An updated convergence programme mapping out the EU newcomer's fiscal policy goals, obtained by Reuters, confirmed the previous target of slashing the public deficit to 3.8 percent of GDP in 2006.
The plan also stuck to the 2005 public budget gap forecast of 4.8 percent of gross domestic product (GDP), despite growing market belief this is too high in the light of fiscal outperformance so far this year.
Five percent growth in the economy and swelling profits at big corporations have boosted tax revenues while spending has lagged what critics say were overstated full-year targets, leaving the year-to-date central budget in the black since June. "The structural increase in tax revenues has made it easier to meet fiscal targets.
This development has weakened the need for significant expenditure savings in the election year," the convergence plan, due to be debated in cabinet next week, said.
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