The Czech Republic’s economy will contract 1% in 2013 but will return to a stronger than previously expected growth next year thanks to domestic policies and an improvement in the eurozone, the country’s main trading partner, the World Bank said in the December issue of its EU11 Regular Economic Report. In the previous edition of the report the World Bank was forecasting a 0.4% GDP contraction for 2013 and a growth of 1.6% for 2014.

Besides the Czech Republic, the EU11 countries are Bulgaria, Croatia, Hungary, Estonia, Latvia, Lithuania, Poland, Romania, Slovenia and Slovakia. The EU 11 region is set to expand by 1% in 2013 mainly supported by rising exports, the bank said adding that growth in 2014 will pick up to 2.3%. The Czech Republic will perform under the EU 11 average both in 2013 and 2014.

The bank expects growth in the region in 2014 to be more balanced with rising domestic demand. Yet, recovery is expected to be protracted with growth below pre-crisis rates for some time. Demand and supply of credit are subdued in many countries despite continued monetary policy easing, the bank said urging for reforms that will promote private investment.

The World Bank’s outlook for the Czech economy is in line with the latest forecast by the European Commission. The IMF sees a 0.4% GDP drop in 2013 and a 1.5% growth for 2014. The Czech finance ministry expects the economy to shrink by 1% this year and expand by 1.3% in 2014.