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5qualityofpublicfinances–revenuesandexpenditures.doc

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Convergence Programme Czech Republic November 2007 Contents: Introduction 5 1 Economic Policy 7 1.1 Fiscal Policy 7 1.2 Monetary Policy 8 1.3 Structural policies 8 2 Macroeconomic Scenario 10 2.1 The World Economy and Technical Assumptions 10 2.2 Current Macroeconomic Development 11 2.3 The Medium-Term Scenario 12 2.4 Net Lending/Borrowing and Sectoral Balances 17 2.5 The Growth Implications of Structural Reforms 18 3 General Government Deficit and Debt 20 3.1 The Government’s Strategy and the Medium-Term Fiscal Targets 20 3.2 Current Development of Public Finances 20 3.3 The Medium-Term Fiscal Outlook 21 3.4 The Structural Balance and the Fiscal Stance 22 3.5 Government Debt 23 3.6 The Budgetary Impact of Major Reforms 24 4 Comparison with the Previous Convergence Programme and Sensitivity Analysis 26 4.1 Comparison with the Previous Macroeconomic Scenario 26 4.2 Comparison with the Fiscal Framework of the Previous Convergence Programme 27 4.3 Sensitivity Analysis 28 5 Quality of Public Finances – Revenues and Expenditures 33 5.1 The Government’s Strategy 33 5.2 General Government Revenues 33 5.3 General Government Expenditures 36 6 Sustainability of Public Finances 41 6.1 The Government’s Strategy 41 6.2 The Fiscal Consequences of an Ageing Population – a Long-Term Projection 42 7 Changes to the Institutional Framework for Fiscal Policy 45 7.1 Changes to Budgetary Legislation 45 7.2 Ending the Activities of the Czech Consolidation Agency 46 7.3 Simplifying the System of Tax Administration 47 8 Annexes 48 8.1 Table Annex 48 List of Tables: Table 2.1: Assumptions on the external environment 10 Table 2.2: Economic growth 14 Table 2.3: Prices of goods and services 15 Table 2.4: Employment and wages 16 Table 2.5: Net lending/borrowing 18 Table 3.1: General government deficit by sub-sector 21 Table 3.2: General government deficit by sub-sector 22 Table 3.3: Structural balance 23 Table 3.4: Government debt by sub-sector 23 Table 3.5: Government debt and related indicat