The draft state budget for 2027 projects an increase in the deficit of CZK79bn yoy, to CZK389bn. As a percentage of GDP, this would represent the largest deficit since 2022. The public finance deficit is expected to widen from 2.8% this year to 3.5% of GDP, meaning the expansionary impact of fiscal policy will intensify further. However, given the virtually unchanged share of public capital expenditure in GDP and the robust condition of the domestic economy, we anticipate that further fiscal easing next year will provide only temporary support for economic activity. At the same time, heightened inflationary pressures may keep interest rates and bond yields relatively higher for longer. Unless there is significant consolidation as projected in the Ministry of Finance’s published medium-term outlook, the debt-to-GDP ratio will likely continue to rise and could exceed 50% by the end of the decade.