Market sees Czech economy exiting recession in Q2.

By bne IntelliNews August 13, 2013

Czech economy probably exited its longest recession on record in the second quarter of 2013 helped by government spending and rising demand from abroad, analysts polled by CTK news agency said.

The gross domestic product grew by 0.6% on the quarter in Q2, following a 1.3% contraction in the first three months of the year, the the biggest fall during the economic downturn. 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.

Analysts expect the GDP to fall by over 1% on the year in Q2, after a 2.4% annual slump in the first quarter. The statistics office will announce preliminary GDP data for Q2 on August 14.

The ailing economy has forced the central bank to cut interest rates close to zero and central bankers are now debating when to launch the first in more a decade currency interventions to weaken the koruna and further ease the monetary conditions. According to minutes from the central bank’s latest rate setting meeting on August 1, the central bankers said that economic data are sending mixed signals. While the quarterly rise in household consumption, some positive data from the labour market and widening trade surplus point to the end of economic recession, retail sales and industrial output showed a sharper than expected drop in June.

Measures to revive the economy have been delayed as the centre-right government of Petr Necas collapsed in June amid a bribery and spying scandal. Then President Milos Zeman appointed his longtime leftist ally Jiri Rusnok to form a new cabinet against the will of the main political parties and as expected he failed to win a vote of confidence in parliament last week paving the way for early elections to be held likely in October before a regular vote due next May.

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