Czech FinMin sharply raises 2014 GDP growth outlook to 2.7%, lowers deficit target to 1.5%

By bne IntelliNews July 29, 2014

The Czech finance ministry improved its GDP expectations for 2014 reflecting the stronger-than-expected economic activity in the first quarter of the year, the ministry said in a new forecast released on July 28. The ministry expects the GDP to rise by 2.7% this year, sharply improving its forecast from April when it was expecting a 1.7% rise.

For 2015 the ministry also raised its forecast to 2.5% from 2%. In both 2014 and 2015, all expenditure components should contribute positively to economic growth. Domestic demand should account for two thirds of economic growth and foreign trade balance for the remainder, the ministry said.

Despite the central bank’s interventions to weaken the koruna and bring inflation back to its 2% target, inflation should ease to 0.6% in 2014 from 1.4% in 2013. Unlike in previous years, administrative measures (especially a decrease in electricity prices) should have an anti-inflationary impact throughout 2014. In 2015, consumer price growth would quicken to 1.7%.

The improved economic growth outlook is reflected in better expectations for the developments on the labour market. The ministry now sees a faster decline in the unemployment rate than it forecast in April. Also, employment should grow at a stronger pace in 2014 than previously thought.

On fiscal policy, the ministry also raised its expectations saying it expects this year’s budget deficit to stay at 1.5% of GDP, lowering the estimate by 0.3pps from April thanks to improvement in tax incomes, mainly direct taxes and VAT, and lower expenditure on interest payments due to very stable debt development and relatively favourable financial markets conditions. 

The government sector debt as a percentage of GDP decreased slightly to 46% in 2013 and in 2014 the ministry expects it to fall further to 44%.

The ministry's new GDP growth forecast for 2014 is slightly more optimistic than the IMF's latest projection for a 2.5% economic growth. Both the European Commission and the World Bank see the Czech 2014 GDP growth at 2%.

  2013 2014 2015 2014 2015
    Current forecast Previous forecast
GDP growth in % -0,9 2,7 2,5 1,7 2,0
Household consumption growth in % 0,1 1,6 1,4 0,6 1,5
Govt consumption growth in % 1,6 1,9 1,6 0,8 0,7
Gross fixed capital formation growth in % -3,5 4,1 3,5 2,7 2,0
Contribution of foreign trade to GDP growth -0,3 0,6 0,5 0,5 0,6
Contribution of increase in stocks to GDP growth -0,2 0,0 0,2 0,2 0,1
Avg inflation in % 1,4 0,6 1,7 1 2,3
Employment (LFS) growth in % 1,0 0,5 0,2 0,2 0,2
Unemployment rate (LFS) avg in % 7,0 6,4 6,1 6,8 6,6
Wage bill (domestic concept) growth in %, curr.pr. -0,9 2,8 3,8 1,8 3,5
Current account % of GDP -1,4 0,4 0,0 -0,4 -0,3
Govt balance % of GDP -1,5 -1,5   -1,8  
Govt debt % of GDP 46,0 44,0   44,0  
Source: Czech finance ministry's July macroeconomic forecast

Related Articles

Hungarian PM's "proxy" moves into the nuclear industry as Paks tenders approach

Firms controlled by Hungarian oligarch Lorinc Meszaros have purchased a 51% stake in the Hungarian subsidiary of Czech nuclear ... more

Czech PM accepts new nominee for finance minister

Reducing the political tension in the country a little, Czech Prime Minister Bohuslav Sobotka accepted on May 17 the nomination of a new finance minister from coalition partner Ano. Meanwhile, ... more

RBI doubles net profit y/y in Q1 as Russian business recovers

Raiffeisen Bank International (RBI), the second largest bank operating across Central and Eastern Europe by assets, reported that net profit almost doubled year-on-year to €220mn in the first ... 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