Fiscal-Structural Plan of the Czech Republic for 2025–2028 period
The Czech Republic submits its first medium-term Fiscal-structural plan, replacing the existing Convergence Programme and National Reform Programme. The plan is guided by Regulation (EU) 2024/1263 of the European Parliament and of the Council on effective economic policy coordination and multilateral budgetary surveillance and repealing Council Regulation (EC) No 1466/97. It thus takes over the role of coordinating Member States’ economic policies within the European Union and contributes to multilateral surveillance under the Treaty on the Functioning of the European Union.
The Fiscal-structural plan of the Czech Republic is prepared for the period 2025–2028. It combines fiscal policy with structural reforms and investment. The consistency of the two reinforces confidence in sustainable public finances based not only on financial indicators but also on sustainable and inclusive economic growth. The original fiscal rules of the European Union, enshrined in the Maastricht Treaty in 1992 and later defined by the Stability and Growth Pact, have been repeatedly tested by various crises and have faced problems related to their practical enforceability. Over time, the design of the rules became so complex that it no longer provided transparent guidance on fiscal responsibility and correction. The new regulation on the preventive arm puts the sustainability of public debt over the medium term at the forefront. The means to achieve the sustainability are public expenditures that are largely under the direct control of the public administration while allowing for countercyclical macroeconomic stabilisation.
Although the Czech Republic’s public debt has increased significantly since 2019, it is still below 60% of GDP. On the other hand, the public deficit has always been above 3% of GDP since the same year. However, thanks to the consolidation that has begun, we expect the deficit to fall to 2.8% of GDP in 2024, including expenditure related to the recovery from the September floods. This has led the European Commission not to open an excessive deficit procedure against the Czech Republic, which also moderates the requirements for the Fiscal-structural plan, consolidation and reforms. However, in addition to the persistence of a deficit of over 2% of GDP, especially taking into account the business cycle and one-off measures, the Czech Republic will face other challenges in the medium and long term. These include the transition to a climate-neutral and digital economy, ensuring energy security, promoting open strategic autonomy, addressing demographic change, strengthening economic and social resilience and convergence.
To still meet the Treaty on the Functioning of the European Union criteria over the next 14 years, the new European fiscal rules require a general government surplus of at least 0.4% of GDP in 2028, taking into account the impact of the economic cycle, one-off or transitional measures and excluding interest expenditure.
The Czech Republic’s Fiscal-structural plan is based on the Ministry of Finance’s August 2024 macroeconomic forecast, which was unanimously assessed as realistic by the Committee on Budgetary Forecasts on 29 August 2024. The fiscal basis for the plan is the current version of the Fiscal Responsibility Rules Act. By respecting the maximum deficits specified in the Fiscal Responsibility Rules Act, we estimate that, given the economic developments, the balance at the end of the plan horizon will be exactly as required by the European Commission.
In its structural part, the plan responds to the recommendations issued by the Council of the European Union on economic, budgetary, employment and structural policies under Articles 121 and 148 of the Treaty on the Functioning of the European Union – in particular, to those where the Czech Republic has not made sufficient progress. At the same time, the roadmap addresses the priorities, common policies and objectives of the European Union. It is therefore divided into areas dedicated to decarbonisation, social systems, education, the labour market and housing support, and last but not least, modern public administration and digitalisation. Individual measures, reforms and investments also provide information on compliance with the commitments contained in the National Recovery and Resilience Plan and the concluded Partnership Agreement under the Multiannual Financial Framework.
As part of the preparation, the plan was consulted with non-governmental actors, and the form of participation was similar to the previous National Reform Programmes and Convergence Programmes. A proper inter-ministerial comment procedure involving the economic and social partners took place. On 17 September 2024, a roundtable discussion on the draft plan was held, to which representatives of economic and social partners, the non-profit sector, representatives of regions, as well as both chambers of the Parliament and other relevant institutions, including the Czech Fiscal Council, were invited. A working version of the plan was also provided to the government advisory bodies representing, inter alia, non-governmental actors: the Government Council for Sustainable Development and the European Union Committee of the Government Council for Non-Governmental Organisations. The plan was also discussed on 8 October 2024 at the Committee on Economy, Agriculture and Transport and on the same day at the Committee on European Union Affairs of the Senate of the Parliament of the Czech Republic. In addition to the roundtable, representatives of the economic and social partners were able to present their views at the Working Party of the Economic and Social Agreement Council for the European Union on 10 October 2024.