OECD lowers Czech 2013, 2014 economic outlook, says govt to meet budget deficit target.

By bne IntelliNews November 19, 2013

The Czech economy should contract by 1.5% this year as domestic demand continues to fall amid the weak labour market, low confidence and fiscal consolidation, the Organisation for Economic Cooperation and Development (OECD) said in its latest Economic Outlook published on November 19, 2013 worsening its forecast from an earlier expected GDP drop of 1%.
Growth is expected to gather pace next year as fiscal consolidation will make a pause and demand from abroad strengthens, the OECD said noting that the recovery will be sufficiently stronger to gradually narrow the output gap despite the fact that unemployment will decrease only slightly due to an unwinding of labour hoarding.

In 2014 the economy should return to a growth of 1.1%, weaker than an earlier estimate of 1.3% announced in May. Risks to the forecast are mostly external as recovery depends on developments in the eurozone, the Czech Republic’s main export market. In case downside risks in this area materialise, export growth would stall damaging confidence and the recovery. On a positive side, a stronger-than-forecast domestic confidence could trigger more investments and job creation.
The Czech government expects the GDP to shrink by 1% and the central bank sees a 0.9% drop in 2013.
The OECD sees the Czech public finance deficit narrowing to 2.9% of economic output in 2013, in line with the government target.
The weak economy and falling fuel and utility prices brought inflation to below 1%, which is the lower boundary of the central bank’s tolerance band. In order to bring inflation up to its target of 2%, the central bank launched foreign exchange interventions and according to the OECD the bank should continue the interventions until inflation bounces back within the bank’s target and conventional monetary policy tools become effective again.

    Current forecast Previous forecast
  2012 2013 2014 2015 2013 2014
GDP growth % -1.0 -1.5 1.1 2.3 -1.0 1.3
Private consumption growth in % -2.1 0.3 0.8 2.0 -0.7 0.9
Government consumption growth in % -1.9 1.5 0.1 1.3 -0.2 -1.1
Gross fixed capital formation, y/y change -4.5 -4.3 0.4 2.3 -3.6 0.9
Total domestic demand, y/y change -2.8 -2.3 0.4 2.0 -1.2 0.4
Exports growth in % 4.4 0.0 4.6 5.0 0.2 5.9
Imports growth in % 2.2 -0.9 3.9 4.9 0.1 5.1
Inflation rate in % 3.3 1.4 1.0 1.3 1.6 1.3
Unemployment rate in % 7.0 7.0 6.9 6.8 7.3 7.5
General govt balance, % of GDP -4.4 -2.9 -2.9 -2.9 -3.3 -3.0
General govt gross debt % of GDP 55.7 58.6 61.2 63.5 59.3 61.9
General govt debt, Maastricht definition, % of GDP 46.2 49.0 51.6 53.9 49.3 51.9
Current account balance, % of GDP -2.4 -2.1 -2.3 -1.9 -3.0 -2.9
Source: OECD            

Related Articles

Poland’s PKN Orlen launches offer to delist Czechia’s Unipetrol

Poland’s state-controlled oil and gas company PKN Orlen has launched an offer to take over Czech refiner Unipetrol, the Polish company said on December 13. PKN Orlen said it will go through with ... more

Petr Kellner agrees to buy Skoda Transportation for reported €400mn

Petr Kellner, Central Europe’s richest man, has agreed to buy Skoda Transportation, the Czech manufacturer of electric trains, trams and ... more

CEFC and Penta reported to be bidding together for CME

CEFC, the acquisitive Chinese energy group, and Penta Investments, the closely-held Slovak financial group, are bidding together for Time Warner’s stake in Central European Media Enterprises (CME), ... more