MNI, 11.09.2026 – the full interview with Mojmír Hample, chairman of the CFC, is available on the mnimarkets.com website.
The Czech Republic’s debt-to-GDP ratio will go above 50% by 2029, while higher structural deficits mean it could be subject to the European Commission’s Excessive Deficit Procedure in 2028 unless it can once again activate the escape clause for defence investment.
Czech state debt was 44.1% of gross domestic product in Q1 2026, but will grow steadily to a 47% record level by the end of 2027 and if it continues to expand at the current speed is likely to reach 50% by the end of the current election cycle, Fiscal Council chair Mojmir Hampl told MNI in an interview. (See MNI INTERVIEW: Czech To Ease Fiscal Rules-FinMin Schillerova)
“We can’t see any plausible scenario whatsoever which would convince us that we will not see a continuous incremental increase of debt-to-GDP in the years to come,” Hampl said. “At this speed we believe that we can get to 50% by the end of this election cycle.”
Higher deficits need not mean higher interest rates, said Hampl, a member of the Czech National Bank’s Bank Board from 2006 to 2018, but with the Czech economy already operating at full potential, there will „definitely“ not be space for cuts.
“That seems to me to be clear, based on what the central bank has said over the past year,” he said. “One therefore has to be very careful about the potential implications of fiscal expansion in a very small, open economy. We might experience a material deterioration of the external imbalance of the economy.”
The Budget set to gain parliamentary approval on September 21 is “very expansionary, one which doesn’t have a precedent in good times in the modern history of Czechia,” Hampl said.
ESCAPE CLAUSE
Overall fiscal deficits for next year will be 3.5% according to government estimates, though the Council believes 3.7% is more likely. Any attempt to claim the deficit is below the 3% threshold that would trigger the EU’s Excessive Deficit Procedure will rely on the national escape clause adding fiscal space equivalent to 0.7%, though the degree to which is would apply in 2028 is “unclear”, Hampl said.
“If there are no further increases of expenditure during 2027, then in the following year we will not get into the excessive deficit procedure. But if, for example, the weapons and equipment we have paid for in 2007 arrive in 2028, then the ability to use this escape clause will be lower, because it will shrink the amount of deficit spending you can use for that purpose.”
Government promises to begin consolidation in 2028 and 2029 won’t be met because they coincide with presidential and general elections, respectively, he added.
“The naked truth is that the government is not preparing itself and the budget process for any consolidation whatsoever. We believe that we will stay on this course and go down the road of minor incremental increases of debt-to-GDP in the years to come.
“It will not be huge. It will not be Romania or Poland. From the level of structural deficit of close to 2% we will end up substantially over 3%, and we will stay at, or very close to these levels.”
PRODUCTIVITY
The government’s aim of boosting Czech productivity, economic growth and state revenues by investing large amounts of public money in order to attract private capital also does not hold water, Hampl said.
Even the most productive investment – “And defining what is or is not an investment is itself very tricky in the public sphere” – will bring the multiplier maximum to 0.6 or 0.7 in relation to GDP, he said.
“If you look at the fiscal structural plan prepared by this government, the very government which says that we will invest substantially – although the investment-to-GDP ratio is actually not substantially higher than in previous years – it is clear that it also doesn’t believe that any multiplier is above one in any investment area.
“Nobody can seriously believe that even investing substantially more in relative terms compared to the past at the point when the economy is at its potential, when unemployment is low and there is very little unused capacity, will bring anything substantial in terms of GDP growth. It is pure political rhetoric. The macroeconomic story is not in line with this political story, not at all.”