On Thursday, 25 April, the National Budget Council held its first roundtable—a discussion between economists from the public, academic and private sectors. The aim was to exchange opinions on certain topics that the National Budget Council examines when assessing the sustainability of public finances. These were primarily areas that economists in the Czech Republic and around the world did not unanimously agree on how, or even whether, to consider regarding the sustainability of public finances.
Presented by the National Budget Council Office head analyst Jan Kubíček, the meeting saw members of the National Budget Council discuss topics such as the impact the state’s growing indebtedness has on interest rates on the financial markets under which the government acquires finances. Digitalization and robotics and their impact on labour productivity and subsequent reflection in the government sector’s budgetary revenues was also reviewed. The topic economists at the meeting agreed on most was in forecasting the sustainability of public finances, concurring that it is prudent to assume existing laws and taxation and expenditure policies will remain in place, even though it is clear that these laws and policies may in fact change. The National Budget Council took this approach when compiling its very first Report on the Sustainability of Public Finances, published in October 2018.
Assuming that existing laws remain in place, one fundamental exception must be made and violate the presumption of compliance with statutory budgetary rules. After all, if these rules always worked flawlessly, debt in the government sector would not significantly exceed the limit of the debt brake (government sector debt consisting of 55 % of GDP). Under these conditions, it would make no sense to forecast the sustainability of public finances. The conclusion would always be that public finances are sustainable, as this is stipulated by law.
An interesting debate also arose on the parameters that should be most carefully considered when assessing the sustainability of public finances. While the parameters used by the National Budget Council include debt in relation to GDP, the Deputy Finance Minister mentioned that, from his point of view, it would be better to use an indicator to determine the highest public finance sector deficits for each forecast year in order to ensure that public finances continued to be sustainable at the end of the year.
After the positive experience with its first roundtable, the National Budget Council is planning to hold similar specialised meetings in the future for attendance by economists.