Czech finance ministry cuts 2013, 2014 economic outlook, keeps deficit target.

By bne IntelliNews July 25, 2013

The Czech finance ministry cut its GDP outlook for 2013 and 2014 due to a deep slump in economic activity in the first quarter and a steeper drop in investments projected for the two years, the ministry said in a newly-released forecast on July 25.

The Czech economy, which shrank by 1.2% in 2012, should contract by 1.5% this year, according to the ministry’s new forecast, while in its previous forecast published in April it was expecting a stagnation. In 2014 the Czech economy will return to a 0.8% growth, yet smaller than April’s forecast of 1.2%. The Czech economy entered its longest recession in a decade contracting for the six straight quarter in Q1 as it is suffering from low domestic demand as businesses and households are cutting spending amid the government’s austerity measures and the eurozone’s debt crisis.

The ministry expects household consumption to drop by 0.8% in 2013 but rose by 0.4% the next year. Household consumption in 2013 and 2014 will be supported by significantly lower growth of consumer prices. However, this growth will be accompanied, particularly in 2013, by only negligible growth of nominal disposable income, the ministry said. In 2013, the negative contribution of gross domestic expenditure to GDP growth will be mitigated by the minimal positive contribution of foreign trade. According to the ministry’s estimates, real exports should decrease by 1.1% this year and imports are seen contracting by 1.4%. In 2014, GDP growth should be driven by a positive balance of foreign trade with real exports growing by 2.9% and imports by 2.4%.

The Czech budget deficit for 2013 is projected to narrow from 4.4% of GDP in 2012 to 2.8%, the ministry said keeping unchanged its target from April. Upside risks to the general government sector balance include additional income from the sale of emission allowances and the possible sale of LTE licences to mobile operators expected to bring in CZK 8-14bn. On the other hand, lower EU funds and higher flood damage costs represent downside risks.

Employment is forecast to rise by 0.5% in 2013, versus April’s estimate for a contraction of 0.2%, while unemployment should rise from 7% in 2012 to 7.5% in 2013 and to 7.6% in 2014.

  2012 2013 2014 2013 2014
    Current forecast Previous forecast
GDP growth in %, const.pr. -1,2 -1,5 0,8 0 1,2
Household consumption growth in %, const.pr. -2,7 -0,8 0,4 -1,2 1
Govt consumption growth in %, const.pr. -1,2 0,5 -0,9 -0,2 -1,7
Gross fixed capital formation in %, const.pr. -2,7 -4,3 -0,6 -0,4 0,9
Average inflation rate 3,3 1,6 1,4 2,1 1,7
Employment (LFS) growth in % 0,4 0,5 -0,2 -0,2 0
Unemployment rate (LFS) average in % 7 7,5 7,6 7,6 7,7
Wage bill (domestic concept) growth in %, curr.pr. 1,5 0,7 2,1 1,4 2,7
Current account % of GDP -2,5 -2,3 -2,4 -2,3 -2,3
Source: FinMin          

Related Articles

Czech CPI buys huge Central European retail portfolio

Czech real estate investor CPI Group has bought a large portfolio of Central European retail assets, local media reported on January 17. The investor, which has grown its holdings rapidly since ... more

CEZ ignores Czech finance minister and re-elects CEO

The supervisory board at Czech power group CEZ ignored pressure from the finance ministry to dump the current management, local media report. Finance Minister Andrej Babis has been accumulating ... more

Japan’s Asahi buys a huge round in Central Europe

Asahi has beaten a host of regional heavyweights in the race to buy SABMiller’s Central and Eastern European beer brands, the Japanese brewer announced on December 13. The Asian giant said it ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss