PRAGUE, Jan 3 (Reuters) - The Czech government trimmed the budget deficit a shade more than planned last year after savings and record low debt financing costs made up for lagging tax revenues.
The central state budget deficit for 2012 was 101 billion crowns ($5.3 billion), less than a targeted 105 billion.
Overall, the government spent 47 billion crowns less than planned while overall budget revenue was 43 billion crowns lower due to the economic downturn.
'The deficit is very safely below the limit approved by the parliament,' Finance Minister Miroslav Kalousek told a news conference on Thursday.
'And the government is showing the public, both domestic and international, that it is able to fulfil its financial strategy ambitions and that it is able to gradually trim the budget deficit.'
The government's focus on cutting the deficit has hit consumption and investment and helped to push the economy into a recession, causing tax revenue to miss its target despite a hike in sales tax.
The economy has not grown since the middle of 2011 and many economists forecast, based on economic data so far and leading indicators, that it also contracted in the fourth quarter.
But Kalousek repeated the government was determined to continue on the fiscal tightening path as any easing would lead to higher lending costs, ultimately raising budget spending.
'That is not the policy that this government would pursue,' he said.
Kalousek said the government was on track to meet its forecast for an overall public sector deficit of 3.5 percent of gross domestic product (GDP) last year, versus 3.3 percent in 2011.
Including the cost of a plan to compensate churches for confiscated property, the overall fiscal gap will reach around 5 percent of GDP, he repeated.
This year, the government plans to trim the deficit to 2.9 percent, with the help of hikes in sales and personal income taxes. It has however relaxed targets for 2014 and 2015, to 2.7 and 2.4 percent respectively, to allow for the economy to pick up speed.
Debt financing costs were 57.1 billion crowns last year, 20 billion crowns less than planned, after yields on Czech government bonds sank to record lows in November.
The benchmark 10-year paper yielded 1.942/854 on Thursday, below a comparable French bond which was trading with a yield at 2.119/108.
($1 = 19.0260 Czech crowns)
(Reporting by Jana Mlcochova; editing by Stephen Nisbet) Keywords: CZECH BUDGET/
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