* Deficit narrows on debt servicing costs, spending freeze
* No figure on overall public sector, analysts see 5 pct/GDP
* Instant View: [], Table: []
By Jana Mlcochova
PRAGUE, Jan 3 (Reuters) - The 2010 Czech central state
budget deficit was 6.6 billion crowns ($353.1 million) lower
than the government's target, thanks to falling debt costs and a
freeze on spending, data showed on Monday.
The central state budget gap, the main part of the overall
public sector balance, was 156.3 billion crowns, below the
target of 162.9 billion, the Finance Ministry said on Monday.
The Czech Republic has won the confidence of investors for
its relatively prudent fiscal management, and the lower deficit
is consistent with the ministry's estimates for the overall
public fiscal gap to be around 5 percent of gross domestic
product, less than in many other EU countries.
The government has pledged to slash the public sector
deficit, which also includes local budgets, public health
insurance and various off-budget funds, to 4.6 percent next year
and below the EU-prescribed 3 percent of output by 2013.
"If this is reflected in the (European Union's) ESA95
methodology, the Czech Republic will show a deficit at the level
of 5 percent, which is a better average compared with many
European countries and considering the crisis," said Pavel
Sobisek, chief economist at UniCredit in Prague.
The ministry did not give an estimate of the overall
deficit.
The central European country had officially targeted the
2010 gap at 5.3 percent, and the latest ministry forecast from
November put it at 5.1 percent.
The centre-right government, which took power after an
election in May, agreed in July to freeze spending of some 12
billion crowns in response to lower tax revenue to keep the
deficit on target. []
The government also saved on debt servicing costs thanks to
a drop in interest rates and stabilisation of risk premium
linked to Czech assets. The Finance Ministry has estimated it
cut debt servicing costs by 21 billion crowns from originally
expected 56.8 billion.
The ministry expects the Czech economy to have grown by 2.2
percent last year with expansion slowing to 2.0 percent this
year as strong export activity counterbalances a dip in
household spending caused by austerity measures.
While the government plans to cut the deficit to the 3
percent level prescribed by rules for adopting the euro, the
Czechs have no euro target date and the government does not plan
to set any before it term ends in 2014.
The government has approved spending cuts, including in
public wages, and tax hikes for this year to achieve a further
reduction in the deficit.
It plans to introduce an overhaul of the pension and health
financing systems to parliament this year in order to put the
budget on a sustainable path over the long term.
Analysts and rating agencies have said the outcome of those
plans would be the key to determine the country's longer-term
fiscal outlook and investment risk.
(Editing by Toby Chopra)
