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Macro Monitor: Czech Republic‏

ByDanske Markets
Published 05/06/2013, 08:03 AM
Updated 05/14/2017, 06:45 AM
CNB_OLD
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BMA
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The Czech economy remained in recession throughout 2012, with GDP contracting on average by 1.2% y/y. The main drag on growth last year was private consumption, which was hit by austerity measures introduced by the government. Even though foreign trade supported growth positively, it failed to offset the negative shock from weak private demand and investments.

Unfortunately, the outlook for the Czech economy remains gloomy. It is generally expected that the economy will remain in recession this year too. Indeed, the Czech central bank (CNB) has just revised both its 2013 and 2014 GDP forecasts down, and now expects a deeper fall in 2013 GDP of 0.5% compared with 0.3% previously. In 2014, the CNB expects a weaker recovery than previously thought, with GDP growth of 1.8% (down from 2.1% growth previously). However, our economic outlook is slightly more positive than CNB’s for 2013, but somewhat more negative for 2014. We expect 2013 GDP to contract by 0.2% y/y, with private consumption in particular set to remain the main drag on growth. Next year should bring a moderate recovery, but we still expect the economy to operate well below its potential, and forecast a minor GDP growth of c 1.1% y/y.

Inflation over the next three years should hover below the official central bank target of 2%. We expect VAT changes effective from January 2013 to have only a negligible effect on headline inflation in 2013. In our view, demand-pulled inflationary pressure will be absent in all three forecast years.

To Read the Entire Report Please Click on the pdf File Below.


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