Czech state finances showed the smallest deficit ever last year, boosting the country’s status as an investor haven with one of the world’s lowest bond yields.
The public-finance gap narrowed to 0.42 percent of gross domestic product in 2015 from 1.95 percent a year earlier, and state debt decreased to 41 percent of GDP from 43 percent, the Czech Statistics Office said on Friday. The shortfall was smaller than the government’s January forecast of a 1.1 percent gap and the European Union’s limit of 3 percent.
“This is a positive surprise that should reassure investors and be supportive of Czech government bonds,” said Jakub Seidler, chief economist at ING Groep NV’s unit in Prague. “It’s mainly a result of strong economic growth last year and an influx of EU funds. The success is unlikely to be repeated this year, with the expected economic slowdown and general elections in 2017.”
The post-communist nation is moving closer to its longer-term goal of having a balanced budget as one of the highest economic growth rates in Europe helped it cut unemployment and reduce borrowing needs. Investors are paying the government for parking cash in its bonds with maturities of up to five years, and the 10-year yield at 0.40 percent is below that of higher-rated France.
The Finance Ministry said in a separate statement it expects the shortfall to widen to 0.6 percent next year.