Debt in the EU is falling, but the Czech Republic is seeing record growth: what does this mean for the economy?
The European Union’s debt continued its downward trend in the third quarter of last year, reaching 82.6% of gross domestic product (GDP), according to information released by Eurostat.
However, compared to this positive trend, the Czech Republic has seen the opposite development. The country’s indebtedness increased to 44.5% of GDP in the relevant period, which represents a significant jump and a record level of indebtedness.
The decline in debt was also observed in the euro area countries, where it fell to 89.9% in the third quarter, a slight retreat from the previous quarter. A year-on-year reduction in debt can be observed both within the EU and in the euro area, also compared to developments in the Czech Republic.
EU government debt reached over EUR 13.78 trillion at the end of the third quarter, an increase on the previous year, when it exceeded EUR 13.20 trillion. In the case of the Czech Republic, debt at the end of the third quarter of 2022 was a record high, reaching more than CZK 3.21 trillion. Compared to the previous year, when the debt exceeded CZK 2.98 trillion, a significant increase can be observed.
EU public finances showed that the deficit reached 2.8% of GDP in the third quarter of last year, an improvement on previous quarters. The Czech Republic, however, saw its deficit deteriorate to 3.1% in the corresponding period, although there was a year-on-year improvement compared to 4.3% of GDP at the end of the third quarter of 2021.
The debt levels of the euro area countries present several notable examples. Greece, despite remaining one of the most indebted countries at 165.5% of GDP, continues to gradually reduce its debt. Other heavily indebted countries such as Italy, France, Spain, Belgium and Portugal have debt levels in excess of 100% of GDP. In contrast, the Czech Republic remains well below the EU average, including notable countries such as Estonia, Bulgaria, Luxembourg and Sweden, which have debt levels below 30% of GDP.
In the Czech Republic’s modern history, the lowest debt levels were recorded in 1996-1998, when they reached 9% of GDP. These periods of low debt coincided with the Václav Klaus government. From 1999 to 2013, there was a gradual increase in debt.
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