Fiscal Implications of Population Ageing

The paper explores the long-term fiscal implications of population aging in the Czech Republic. The results, although bearing a significant margin of uncertainty due to the very long-term character of the projection exercise, do not impart encouraging fiscal outlooks for the Czech Republic. This is hardly surprising given that the Czech Republic is facing pronounced population ageing. Moreover, the fiscal position of the Czech Republic is presently very poor, in spite of its (still) low level of debt and debt interest payments. The Czech Republic?s high primary deficit will foster a rapid rise in debt irrespective of population ageing. Therefore, to cope with the expected fiscal pressures, it is necessary not only to overhaul the pension and health-care systems in the medium term, but also to immediately start an intensive strategy of consolidation aimed at significantly reducing the high primary deficit.ageing populations; fiscal policy; fiscal sustainability

Cyclically Adjusted Fiscal Balance: OECD and ESCB Methods

The paper considers the impact of the business cycle on Czech fiscal balance in the past decade. The authors employed two different calculation methods in their analysis: an OECD and an ESCB method. Two crucial findings emerged from the analysis. First, the estimates of cyclically adjusted deficits in the Czech Republic proved their robustness, because both our calculation methods, although being philosophically different, provided very similar results. Sharply deteriorating Czech budget deficits are basically structural in nature, i.e., they are independent of the business cycle. Moreover, another hypothesis was confirmed: Czech fiscal policy exhibits mainly pro-cyclical features. As the paper further documents, both basic assessments held true even when quasi-fiscal deficits were included in the analysis.off-budget transactions; quasi-fiscal policy; cyclically adjusted balance; fiscal stance; fiscal policy

Structural Deficits in Czech Public Finances

The paper analyzes the fiscal position of Czech public budgets. It focuses on the structural and the cyclical parts of the budget deficits and concludes that public budgets were in structural deficit as early as 1994. The authors propose three methods toward estimating the potential output of the Czech economy and demonstrate how these estimates lead to different conclusions vis-a-vis fiscal policy. Their analysis shows that the Czech economy under-performs with respect to its perceived convergence with the European Union. The authors also adjust the official budget numbers for one-off privatization revenues. These revenues considered, public budgets appear significantly less balanced, and recent practice suggests a mounting budgetary dependence on privatization revenues.fiscal policy; budget deficits; structural deficit; output gap; potential growth; convergence