The European Commission has released its economic growth forecast for the Czech Republic which predicts a growth of 2.5 percent for 2014 and 2.7 percent for the next two years. The deficit in public financing is expected to stay well below the recommended 3 percent of GDP. In 2014 the Commission predicts a gap in spending of 1.4 percent of the GDP, 2.1 percent next year and 1.7 percent in 2016. The forecast is slightly more optimistic than the one released by the Czech Finance Ministry which recently reviewed its economic growth forecast for this year down from 2.7 to 2.4 percent of the GDP. Its growth forecast for the next two years is 2.5 percent.
The Czech power company ČEZ has said it will temporarily halt operations at its coal burning plant in Bulgaria as of the beginning of next year after it emerged that a planned investment to bring the plant up to EU environmental rules would not be economically justifiable given the cost of electricity.
Nine months after its appointment, the Czech government is stable and can rely on sufficient support in Parliament, Prime Minister Bohuslav Sobotka said in a statement marking a year since a snap general election. The government’s stability allows it to undertake unpopular measures including labour market and education reforms, the prime minister said. The government has successfully launched a public administration reform but should improve tax collecting and curb crime, according to Mr Sobotka.
In Business News: Czech Airlines gets a firm commitment for financial support from Korean Air and pushes ahead with restructuring plan, the ruling parties agree on the introduction of kurzarbeit to cushion the impact of the EU-Russia sanctions and give their approval to a finance ministry proposal to level a punitive tax on undeclared property, and, the average interest rate on mortgage loans drops to its lowest level since 2003.
The Czech Finance Ministry has lowered its forecast for this year’s GDP growth to 2.4 percent, down from its previous estimate of 2.7 percent. The ministry said is cut the forecast due to revisions of the country’s economic growth in the previous quarters as calculated according to a new European methodology, known as ESA 2010. In the next two years, the ministry expects the economy to grow by 2.5 percent, mainly because of growing domestic consumption.
The Senate on Thursday approved a government-proposed bill on the introduction of a third 10 percent VAT rate on books, baby food and medicines as of January 2015. The basic VAT rate of 21 percent and the reduced rate of 15 percent will be maintained. The bill still needs to be signed into law by the president.
The lower house of Parliament has approved legislation that allows the exchange of information about banking accounts with other countries. The bill is a prerequisite for the implementation of the FATCA agreement with the United States which will require Czech financial institutions to inform US authorities about account owned by US citizens.
The Czech Finance Ministry is working on a draft law which would give the tax authorities more powers in investigating the source of undeclared property exceeding 10 million crowns. If the owner is unable to prove the origin of the assets, the authorities could levy a high tax on them. The proposal, which is part of a coalition agreement signed by the three ruling parties, has raised protests from the opposition.
The Labour and Social Affairs Ministry has drafted a bill which would allow thousands of miners to go into early retirement, thereby easing the social impact of the planned closure of the Paskov black-coal mine in north Moravia. The gradual phase-out of the coal mine and its eventual closure is expected to place a heavy social burden on a region where unemployment is traditionally high.
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