Report on the development of budgetary management of municipalities, voluntary associations of municipalities and regions as at 31 March 2023
Territorial self-governing units are in very good financial condition in the first quarter of this year, and their economic results overshadow the results of previous years.
In March, the Czech economy continued to be accompanied by double-digit inflation, the energy crisis and the impacts of the invasion of the Russian troops in Ukraine, which are reflected in the income and expenditure side of the state budget, as well as in regional budgets. However, despite these influences, the domestic economy finally came out of recession in the first quarter. The outlook for the development of the Czech economy this year also becomes more optimistic. While the January macroeconomic forecast of the Ministry of Finance predicted a decline in economic growth, the latest forecast already expects growth. A positive development is also expected on the side of territorial budget’s finances, which should end up with a surplus this year. The results from the first quarter also confirm this for now. While the regions reported the third highest positive budget balance, the municipalities in March even managed the highest budget surplus in the last decade.
At the end of March 2023, the territorial budgets reduced their debt year-on-year and, on the contrary, increased the balance of funds in bank accounts. The year-on-year reduction in debt and at the same time the year-on-year increase in capital expenditure confirms the good financial position of municipalities and regions, which are able to finance some investment activities without the involvement of external funds. Territorial budgets continue in the trend of accumulating their savings. With regard to still double-digit inflation, the accumulation of these funds, even for the purpose of realizing investments financed mainly from own resources, is still undesirable, as these deposits lose their value due to inflation.
Local Governments
In March 2023 municipalities, regions and voluntary associations of municipalities operated with a budget surplus of CZK 25.6 billion. The economic result increased against last year by 60.3%, i.e. CZK 9.6 billion. The management of territorial budgets thus surpassed the results of 2020, i.e. the period before the outbreak of the first wave of the COVID-19 pandemic (see chart no. 1). Adjusted total budget balance1 amounted to CZK 22.1 billion. Territorial budgets are still performing very well in the first quarter of 2023, despite economic stagnation and inflation.
The total revenues of local budgets reached CZK 212.1 billion in March 2023 and increased by 33.2%, i.e. by CZK 52.9 billion. Adjusted total revenues1 amounted to CZK 145 billion. Their own revenues amounted to CZK 114 billion and increased by 17.2% in comparison with last year, i.e. by CZK 16.7 billion. This growth was caused by a rise in tax revenues, which reached CZK 96.9 billion and increased by 18.7%, i.e. by CZK 15.3 billion.
The total consolidated expenditures of local budgets in March 2023 amounted to CZK 186.5 billion and increased by 30.2% in comparison with last year, i.e. by CZK 43.2 billion. Adjusted total expenditures1 amounted to CZK 122.9 billion. The current expenditures in March amounted to CZK 166.4 billion (CZK +40.1 billion) and the capital expenditures reached CZK 20.1 billion (CZK +3.2 billion). In 2023 local governments realized consolidated expenditures for aid to Ukraine in the amount of CZK 2.3 billion (mainly the capital city of Prague).
Regions
In March 2023 the regions operated with the third highest budget surplus since 2013, amounting to CZK 7.1 billion. The surplus increased compared to last year by 153.6%, i.e. by CZK 4.3 billion. The regions reported better results only in March 2016 and 2019. Adjusted total budget balance1 amounted to CZK 4.5 billion. How described in chart no. 2, the total revenues of the regions in March amounted to CZK 104.8 billion and increased by 48.8%, i.e. by CZK 34.4 billion. Adjusted total revenues1 reached CZK 46.4 billion. Their own income reached CZK 25.5 billion (CZK +4 billion). Improvement of region´s own income was caused by the growth of tax revenues, which increased by 19.7%, i.e. by CZK 3.8 billion, to CZK 22.8 billion.
The total expenditures of the regions in March 2023 amounted to CZK 97.7 billion and increased by 44.5% compared to last year, i.e. by CZK 30.1 billion. Adjusted total expenditures1 reached CZK 41.8 billion. This growth was caused by an increase in current expenses, which increased by 43.8% compared to last year, i.e.by CZK 27.8 billion, to CZK 91.3 billion. The transfers that the regions transferred to contributory and similar organizations reached CZK 70.5 billion and represent 77.2% of total current expenses. Most of these funds were intended for direct education costs. In March 2023 capital expenditures also increased by 54.9%, i.e. by CZK 2.3 billion, to CZK 6.4 billion, despite of actual inflation. In 2023 the regions realized expenditures for aid to Ukraine and its population in the amount of CZK 2 billion.
At the end of the first quarter of 2023, the debt of the regions, including the contributory organizations, amounted to CZK 25.4 billion and compared to 2022 increased by 0.3%, i.e. by CZK 0.1 billion. The slight year-on-year increase in debt and at the same time the year-on-year increase in capital expenditure confirms the good financial situation of the regions, which are able to finance their investment activities with the involvement of a minimum of external funds.
In March of this year, the amount of regional deposits in bank accounts amounted to CZK 86.3 billion, which represents an increase in savings by 21.1% compared to 2022, i.e. by CZK 15.1 billion. In the first quarter of 2023, the regions are continuing the trend of accumulating their savings. As can be seen from chart no. 3, while the debt of the regions has decreased by 5.3% since 2013, the balances in bank accounts are growing dynamically, namely by 232.1%.
Bank accounts (including contributory organizations)
Debt (including contributory organizations)
Municipalities
At the end of the first quarter of 2023, the municipalities managed the highest budget surplus since 2013. The municipal budget reached CZK 18 billion and increase by 40.8% year-on-year, i.e. by CZK 5.2 billion (see chart no. 4). In March the capital city operated with a surplus of CZK 7.5 billion, with total revenues of CZK 32.3 billion and expenses in the amount of CZK 24.9 billion. Without the capital city, the total consolidated revenues of the municipalities amounted to CZK 77.2 billion, expenses to CZK 66.5 billion, and the budget ended in a surplus of CZK 10.7 billion. Adjusted total budget balance1 amounted to CZK 17.1 billion.
The total revenues of municipalities in March 2023 reached CZK 109.5 billion and increased by 22.4%, i.e. by CZK 20 billion compared to 2022. Adjusted total revenues1 reached CZK 100.8 billion. Their own income amounted to CZK 88.2 billion (growth of 16.9%, i.e. by CZK 12.8 billion) and represented the majority of total adjusted income. Increase in own income of municipalities was caused mainly by the growth of tax revenues, which increased by 18.4%, i.e. by CZK 11.5 billion to CZK 74.1 billion.
The total expenditures of municipalities in March 2023 amounted to CZK 91.4 billion and increased by 19.3 %, i.e.by CZK 14.8 billion compared to last year. Adjusted total expenditures1 reached CZK 83.7 billion. The growth was mainly caused by an increase in current expenses, which increased by 21.4% compared to last year, i.e. by CZK 13.7 billion, to CZK 77.5 billion. The capital expenditures of municipalities also increased against last year (specifically by 8.9%, i.e. by CZK 1.1 billion) and reached CZK 13.9 billion. In 2023, the municipalities realized expenditures for aid to Ukraine and its population in the amount of CZK 366.9 million. Expenditures are the largest in the case of capital city of Prague (CZK 325.1 million).
Municipal debt in March 2023 amounted to CZK 70.3 billion, and compared to 2022 it slightly decreased by 1.1%, i.e. by CZK 0.8 billion. The year-on-year reduction in debt corresponds with the development of the base interest rate, which is the highest since 1999, and with the very good financial condition of municipalities.
At the end of the first quarter of 2023, the municipalities had deposited funds in bank accounts in the amount of CZK 349 billion, which represents an increase in savings by 5.3%, i.e. by CZK 17.5 billion, compared to 2022. As well as regions, municipalities follow the trend of accumulation of savings. As can be seen from chart no. 5, since 2013 municipal savings have increased by 214.3%, while municipal debt has decreased by 23.8% over the same period.
Bank accounts (including contributory organizations)
Debt (including contributory organizations)
Voluntary associations of municipalities
In March 2023, voluntary associations of municipalities reported total revenues of CZK 1.1 billion (year-on-year increase of 3.6%, i.e. CZK 0.04 billion) and total expenses of CZK 0.8 billion (year-on-year decrease of 7.9%, i.e. by CZK 0.06 billion). The budget balance ended in a surplus of CZK 0.3 billion (year-on-year growth of 45%, i.e. by CZK 0.1 billion).
1 The total revenues and expenditures without direct education costs and subsidies for private schools, which regions and capital city of Prague directly allocated to the relevant schools and school facilities.