The 2008 draft budget could play a key role in ensuring the Czech Republic adopts economic reforms that will further encourage long-term prosperity, claims the country's prime minister.

Mirek Topolanek, whose party recently won the lower house's vote of confidence, believes that the state budget could encourage further reforms as well as helping to reduce the country's current deficit level, reports the Prague Daily Monitor.

In particular, the proposed plans focus on transforming the Czech benefits system as well as introducing a number of tax legislation aimed at boosting revenue as well as supporting overseas investors, especially within the real estate sector. It is expected that the cabinet will submit the draft budget to the Chamber of Deputies this September.

HVB Bank analyst Pavel Sobisek explained that the proposals could prove to be vital to the country's long term economic success, especially within the EU, but that the government must remain on course with its many objectives.

"I consider the economic part of the policy statement quite realistic, but it will require some creativity in interpretation to meet the obligation to cut taxes for all taxpayers," added Mr Sobisek.

Overseas property investment in the Czech Republic has been particularly strong, especially in the popular city of Prague. Recent changes to regulations surrounding the foreign ownership of property as well as reforms to the process of buying real estate, means there has been an influx of EU citizens looking to benefit from the affordable prices and developing market.