OECD lowers Czech 2013 economic outlook, calls for easier monetary policy.

By bne IntelliNews May 30, 2013

The Czech economy should contract by 1% this year as a result of falling domestic consumption and ongoing fiscal consolidation, the Organisation for Economic Cooperation and Development (OECD) said in its latest Economic Outlook published on May 29, 2013 cutting down its forecast from an earlier expected GDP growth of 0.8%.

The OECD expects the Czech economy to pick up from mid-2003 onwards as exports recover from the negative impact of the euro crisis and improving business and consumer confidence support domestic demand. In 2014 the economy should return to a growth of 1.3%, slightly down from an earlier estimate of 1.8%. Higher industrial output and rising bank lending to the non-financial sector will also support GDP recovery next year.

The organisation sees the Czech public finance deficit narrowing to 3.3% of economic output in 2013 from 4.4% in 2012 but above the government’s target of 2.8%. In 2014 the gap should be trimmed to 3% of GDP, the OECD said adding that fiscal consolidation will likely need to resume to curb the deficit and the growing public sector debt.

After picking up at the beginning of the year due to a rise in the sales tax and regulated price hikes, inflation eased in the following months and is projected to fall to the lower half of the central bank’s tolerance band of 1-3%. With rates close to zero, the central bank should consider ways to further ease the monetary policy to stimulate activity, the OECD said.

  2012 2013 2014
GDP, y/y change -1,2 -1,0 1,3
Private consumption, y/y change -2,6 -0,7 0,9
Government consumption, y/y change -1,2 -0,2 -1,1
Gross fixed capital formation, y/y change -2,6 -3,6 0,9
Total domestic demand, y/y change -2,6 -1,2 0,4
Exports, y/y change 4,2 0,2 5,9
Imports, y/y change 2,5 0,1 5,1
CPI, % 3,3 1,6 1,3
Unemployment rate, % 7 7,3 7,5
General govt balance, % of GDP -4,4 -3,3 -3,0
General govt gross debt, % of GDP 55,9 59,3 61,9
Current account balance, % of GDP -2,5 -3,0 -2,9
Source: OECD      

Related Articles

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

Czech-based CME divests Croatian Nova TV and Slovenian Pop TV for €230mn

Czech Republic-based broadcaster Central European Media Enterprises (CME) on July 10 announced the divestiture of its leading Croatian and Slovenian TV stations to United Group's Slovenia Broadband ... more