September 25, 2017 / 11:44 AM / 10 months ago

UPDATE 1-Czech government approves 2018 budget with shrinking deficit

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PRAGUE, Sept 25 (Reuters) - The Czech cabinet approved on Monday its 2018 central state budget draft with a planned deficit of 50 billion crowns ($2.29 billion), the last finance plan for the centre-left ruling coalition before an October election.

The government is aiming to boost teachers’ pay and other salaries while also trimming a deficit seen at 60 billion crowns in 2017.

The state has had little trouble with financing while the country has the lowest unemployment in the European Union and a fast-growing economy.

“The government unanimously approved the state budget proposal for 2018,” Prime Minister Bohuslav Sobotka said on Twitter while the cabinet met.

He said the draft, which will go to parliament by the end of the month but voted on by lawmakers after an Oct. 20-21 national election, would cover raising pensions, public workers’ salaries and spending on science & research and universities.

The government has kept budgets in check since coming to power in 2014, helped by an economy picking up pace and strong employment boosting wages that have both helped tax revenue.

The ANO movement, led by billionaire former Finance Minister Andrej Babis and a junior ruling coalition partner of Sobotka’s Social Democrats, is projected to win next month’s election by a large margin.

But ANO may still have trouble with coalition building as Babis is facing a police investigation of an alleged EU subsidy fraud. He has denied any wrongdoing.

A booming economy, which grew 4.7 percent year-on-year in the second quarter, may push this year’s budget deficit below plan despite less EU development funds arriving than last year, when the Czechs reported their first budget surplus in two decades.

The central state budget is the main part of overall public sector finances, which also include local and regional governments, the health insurance system and various off-budget funds.

The overall fiscal balance showed a 0.58 percent/GDP surplus last year and the Finance Ministry expects it at +0.4 percent this year. (Reporting by Robert Muller; Editing by Jason Hovet; Editing by Toby Chopra)

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