E&Y lowers Czech 2013 GDP estimate, improves outlook for 2014.

By bne IntelliNews August 26, 2013

The Czech economy should contract by 1% in 2013, consultancy Ernst & Young said in its latest forecast cutting its estimate from a previously expected GDP drop of 0.5%. The downgrade reflects a deeper-than-expected GDP contraction in the first quarter of 2013 and although E&Y expects economic activity to strengthen in the second half of 2013 it won’t be enough to compensate for the weak Q1.

In 2014, E&Y expects the Czech economy to return to a 2.2% growth driven mainly by foreign demand. Thus the consultancy improved its expectations from a GDP rise of 1.9% forecast in March.

E&Y analyst Jan Fanta said that the loosening of austerity measures in the country will depend on further political developments. The Czech economy should expand by 2.7% in 2015 and by 3% in 2016 and keep that pace of expansion in the years till the end of the decade, Fanta added.

According to preliminary figures released by the Czech statistics office earlier in August, the economy exited its longest recession on record in the second quarter of 2013 helped by recovering foreign demand while investments and household consumption continued to decline The gross domestic product grew by 0.7% on the quarter in Q2, following a 1.3% contraction in the first three months of the year. The economy shrank for six straight quarters till Q1 as the government’s fiscal consolidation measures and the eurozone’s debt crisis eroded spending by businesses and households and curbed demand for exports. On an annual basis, the GDP contracted by 1.2% in April to June 2013, after a 2.4% slump in the first quarter. 

In early August, the IMF cut its GDP estimate for the Czech Republic and now expects the economy to contract by 0.4% y/y in 2013 versus an earlier forecast for a 0.3% growth. The World Bank is also expecting a 0.4% drop for this year, while the OECD sees a deeper slump of 1%. The Czech central bank and the government are forecasting a GDP drop of 1.5% in 2013.

E&Y estimates for the Czech Republic 2013 2014 2015 2016
Real GDP growth (%) -1,0 2,2 2,7 3,0
CPI inflation (%) 1,8 1,8 2,1 2,1
Current account balance (% of GDP) -2,5 -3,2 -3,4 -3,3
External debt (% of GDP) 51,5 53,8 54,9 54,8
Govt balance (% of GDP) -2,9 -2,8 -2,4 -2,0
Source: E&Y        

Related Articles

Czech judiciary denounces Poland's move to end separation of powers

Senior Czech judges on July 21 denounced Poland's judicial overhaul as an attack on the rule of law. With big street protests in the Czech Republic's neighbour seemingly gathering momentum – 120 ... more

Strongly profitable Czech petrochemical maker Unipetrol puts cracker explosion behind it

Unipetrol looks to have finally got over the August 2015 fire and explosion that wrecked its steam cracker, an indispensable installation in the production of ethylene feedstock needed to manufacture ... more

Evolution Equity Partners closes $125mn cybersecurity-focused fund

Evolution Equity Partners announced on 17 July the final closing of a new fund with total capital commitments of $125mn to make investments in cybersecurity and next generation enterprise software ... more

Dismiss