In 2011, a number of ex-ante coordination procedures of economic policies in the European Union were initiated. A six-month-long framework will be launched every year at the beginning of January during which the fiscal and structural policies of the Member States will be monitored in order to uncover any inconsistencies in the proposed policies and looming macroeconomic imbalances. This new European governance setup will result in a collection of strategic recommendations that are expected to be taken into account in the preparation stage of national public budgets for the next year.
The Member States ought to include their intended medium term objectives into their Convergence Programmes (or Stability Programmes for euro area countries) and into their National Reform Programmes. According to the current timeline, these documents are submitted to the European Commission by the end of April.
It follows that the Spring Fiscal Outlook of the Czech Republic (FO) would always, to some extent, duplicate the information about the future development of the government sector contained in the Convergence Programme of the Czech Republic (CP). Therefore, we have changed the format of the May Fiscal Outlook which will from now on complement the Convergence Programme. Parties interested in the development of public finances will have the opportunity to acquire additional information, in particular about the current and prior year both in terms of the accrual and the cash methodology, the later of which is not encompassed in the CP. Furthermore, the international comparison section and extended statistical annex are preserved in the spring edition of the Fiscal Outlook.
The aforementioned change will not affect the October edition of the FO that will be published in its full scope and standard structure. The Autumn FO will put additional emphasis on the semiannual evaluation of realized measures of fiscal policy. More specifically, it will determine whether these measures are in line with the Convergence Programme and to what extent these new policies will affect the budget balance of the government sector.
The current issue of the FO thus comes in this slightly modified form. The April Macroeconomic Forecast of MF CR is an indispensible element in analyzing and predicting the development of public finances. According to the Forecast, the Czech economy experiences a moderate economic recovery. Although the growth of main export markets was quite high in 2010, the Czech economy grew by only 2.3% in real terms in 2010. When taking into account all relevant factors, the GDP growth this year and next year is seen as moderate. Nevertheless, the future trend shows acceleration towards 4% growth in 2014. The next chapter contains more information about the main macroeconomic aggregates.
The current setup of fiscal policy described in Sub-Chapter 1.2 reflects the government approved consolidation effort in terms of goals for government sector deficits as a percentage of GDP and for other parameters of the government sector related to the deficit-to-GDP-ratio in the future. The chapter also depicts the expected development of main revenue and expenditure categories and the structure of consolidation measures in 2012-2014.
Chapter 2 presents the development of public finances in the current and last year in both accounting methodologies. The sub-chapter in terms of the GFS 2001 methodology derives its revenue and expenditure parameters from approved budgets of the central government and from the 2010 year-end report. The sub-chapter in terms of the ESA 95 methodology is based on the April fiscal notification published by the Czech Statistical Office (CZSO) in collaboration with MF CR and notified by Eurostat.
Since the scope of the current edition of the Fiscal Outlook has been changed, the thematic chapter has been omitted and more attention will be paid to the statistical annex. The statistical annex is now available for download in the MS Excel format where additionally we provide long consistent time series of government sector variables in terms of ESA 95.