5 October 2020

Influence of extraordinary measures on the revenue, expenditure, and debt of the general government sector and capture thereof in the methodology

Due to extraordinary measures taken by the Government of the Czech Republic caused by the COVID-19 disease epidemic, economic activities in the CR were suppressed for a longer part of the Q2 2020, which had a considerable impact on the revenue and expenditure of the general government. The reduction in economic activity alone and reliefs for the business enterprise sector entailed a decrease in tax and non-tax revenue. Following compensations for enterprises and supporting programmes to maintain the employment were concurrently largely reflected in an increase on the expenditure side.

While the measures were still not reflected much in the data for the Q1, in the data for the Q2 the impacts of the governmental measures related to the COVID-19 epidemic were already significantly reflected. On the expenditure side, the aforementioned measures influenced mainly an increase of subsidies on production (primarily the “Antivirus” programme to support the employment), intermediate consumption (purchases of medical consumables), growth of expenditure capital transfers (e.g. direct support of the self-employed, limited liability companies, and other), growth of expenditure on social benefits (a higher attendance (carer´s) allowance), paid social contributions (increase of payments for the state insured persons). Conversely, a decrease occurred on the revenue side, mainly due to lower tax revenue and revenue from social contributions. An overview of key measures and their capture in the government financial statistics methodology:

Key measures having an influence on an increase of the general government sector expenditure and capture thereof:

Expenditure capital transfers: a compensatory bonus for the self-employed, a compensatory bonus for partners in limited liability companies, COVID Accommodation programme;
Subsidies on production: the Antivirus programme to support the employment, the COVID-Rent programme for entrepreneurs;
Intermediate consumption: purchases of personal protective equipment and medical consumables;
Social contributions: increased payments of the state for the state insured persons;
Social benefits: a higher attendance (carer´s) allowance for employees and the self-employed;
Social transfers in kind: the COVID-Spa programme.

Key measures having an influence on a decrease of the general government sector revenue:

Forgiving of minimum advance payments for the self-employed for social and health insurance.

The governmental measures in the form of guarantees for provided credits and “COVID I, II, III, COVID Plus, and COVID Prague programme” credits provided have not impacted the revenue and expenditure of the general government yet. They also do not have a direct influence on the level of indebtedness of the general government sector. A prospective influence on the deficit and debt of the general government sector will occur at that moment when the credits provided fail or when the guarantees provided are called in.