The Czech Republic is planning the second largest deficit in history.

The Czech Republic plans to face its second-largest budget deficit in history in 2027, according to Finance Minister Alena Schillerova. She announced during a press conference on Monday that the government will increase basic defense spending to 191 billion crowns, marking the first time since many years that the country will meet the NATO target of 2 percent of gross domestic product (GDP). In addition, she stated that investments in road and rail infrastructure, healthcare, and public sector wages will also rise. According to Schillerova, the public sector deficit will reach 2.8 percent of GDP in 2027, following projected deficits of 2.7 percent this year and 2.1 percent in 2025 before the current government took office. The minister emphasized that the Czech Republic will maintain deficits significantly below the European Union average and beneath levels in neighboring Central European countries. She added that the government expects to begin reducing these deficits starting in 2028. This would be the second-largest budget deficit in the Czech Republic's history, after the record deficit recorded during the pandemic in 2021. The government led by populist party ANO, headed by Prime Minister Andrej Babiš, has relaxed legal provisions limiting state expenditure, citing that the previous government left gaps in funding key policies. Schillerova warned that reducing the deficit in 2027 could push the Czech Republic into a "trap of unfinished construction projects, inaccessible healthcare, and economic stagnation." She made this statement during her press conference. Despite growing security threats from Russia, the Czech Republic ranks last among NATO members in defense spending. Babiš’s government has reduced basic defense expenditures prepared by the previous government to just above 1.7 percent of GDP for this year. NATO has called on its members to increase basic defense spending to 3.5 percent of GDP by 2035, with total defense-related expenses reaching five percent of GDP. Several member states have already significantly increased their spending beyond the two percent threshold. The Czech Ministry of Finance previously forecast that public debt would reach 45.8 percent of GDP by the end of 2026. This means the debt will grow, but it will remain significantly below the European Union average. The proposed 2027 budget deficit amounts to 389 billion crowns, equivalent to approximately 16.1 billion euros. Schillerova noted that the government will raise basic defense spending to 7.9 billion euros, achieving the NATO target of two percent of GDP for the first time in many years. She also mentioned increases in investments in road and rail infrastructure, healthcare, and public sector salaries. The public sector deficit in 2027 is expected to be 2.8 percent of GDP, following projections of 2.7 percent this year and 2.1 percent in 2025 prior to the current government taking power. Schillerova highlighted that the Czech Republic will keep its deficits well below the European Union average and under the levels of neighboring Central European countries, with a planned reduction beginning in 2028. This would be the second-largest budget deficit in the Czech Republic’s history, following the record deficit in 2021 during the pandemic. The government led by the populist ANO party under Prime Minister Andrej Babiš has eased legal restrictions on state spending, arguing that the previous administration left gaps in funding crucial policies. Schillerova warned that reducing the deficit in 2027 might place the Czech Republic in a “trap” involving unfinished construction projects, inaccessible healthcare services, and economic stagnation. She expressed this concern during her press conference. Despite increasing security threats from Russia, the Czech Republic lags behind other NATO members in defense spending. Babiš’s government has cut basic defense expenditures set by the previous administration to just over 1.7 percent of GDP for this year. NATO has urged its members to boost basic defense spending to 3.5 percent of GDP by 2035, with overall defense-related expenses reaching five percent of GDP. Some member states have already significantly exceeded the two percent threshold. The Czech Ministry of Finance had previously predicted that public debt would reach 45.8 percent of GDP by the end of 2026. While this indicates an increase, the debt level will still remain notably below the European Union average.