TNBiz (TNBiz)
Macroeconomics  |  February 02, 2012 14:20:11

KB: The Czech economy will grow by 0.1%, household consumption falls by one percent

PRAGUE (MEDIAFAX) - The economy of the eurozone, a target of the vast majority of Czech exports, probably as early as last year's fourth quarter fell into recession, which should hold in the first half of this year, it will affect the Czech economy. It results from the current macroeconomic projections published in the Commercial Bank on Thursday.

Given that the Czech economy in the last two years, an increasing solely due to net exports, it must necessarily economic slowdown in the euro area reflected in the performance of the Czech economy.

"Last year, we expect that the Czech economy as measured by real GDP improved by 1.7 percent, this year we expect a minimum increase of 0.1 percent. Domestic demand will contribute negatively to growth, although we expect this year's decline in real household consumption by almost one percent.Household purchasing power will weaken the next wave of fiscal austerity in force since the beginning of this year, higher inflation, low nominal wage increases and rising unemployment. With de facto stagnation of economic growth there is a consistent rise in the unemployment rate from December's 8.6 percent last year to 9.4 percent at the end of this year, "estimates, chief economist at Komercni banka Jan Vejmelek.

Inflation in October last year, received a two percent target over the central bank and here, according to the KB should remain even after all this year. "Even in the first quarter jump of 3% y / y. Among the main factors that dragged in recent months, inflation up, are weakening the crown and the January VAT increase, while food sales tax changes projected from more than 50 percent before the end of last year.Average inflation for this year is expected to 2.9 percent after 1.9 percent last year, "said Vejmelek.

CNB should therefore, according to him was to leave rates unchanged at 0.75 percent until the end of 2013. "The main reason is anchored low inflation expectations, significant uncertainty associated with the development of the external environment and weak domestic demand. Although inflation was held over four months dvouprocentním CNB's inflation target and remain there throughout this year, it is important to realize that it is mainly due to factors beyond the control of the central bank. Adjusted inflation is in the red, demand pressures in the absence of inflation and the expected evolution of household consumption or nepropuknou this year, "said KB's chief economist.

Crown, according to the KB should be at the end of this year against the euro stronger. "The weakening of the crown since last September, reflecting lower euro area economic activity associated with the growth of risk aversion among investors and weaker demand for Czech exports. Weaker krone contributed to easing of monetary conditions and a stimulating effect on the economy," said Vejmelek.

The experience from the years 2008/2009, according to him shows that the rate CZK / EUR during the current quarter could be somewhere near the top. "The last recession in the Czech economy fell last quarter of 2008, the crown was the weakest in February 2009. Now been recorded quarterly fall in GDP in the third quarter of 2011. In terms of risks for the coming period we can not rule out another wave of weakness especially if risk aversion rise in financial markets, while the annual term, we see further risk to thestronger domestic currency, "said KB's chief economist.

Macroeconomic Forecast - key indicators
2011 2012 2013
GDP (real growth, y / y in%) 1.7% 0.1% 1.3%
Private consumption (real growth, y / y in%) -0.5% -0.9% 1.2%
Fixed investment (real growth, y / y in%) -0.4% 1.3% -0.8%
Foreign trade (CZK bn) 184.5 190.3 220.9
Industrial output (real GDP, y / y) 7.1% -1.6% 1.9%
Retail trade (real growth, y / y in%) 2.0% -1.9% 1.4%

Wages (nominal growth, y / y in%)

2.3% 2.2% 2.8%
Unemployment (MLSA in%) 8.5% 8.9% 9.4%
Inflation (y / y in%) 1.9% 2.9% 1.6%
Adjusted inflation (y / y in%) 0.0% -0.3% 1.6%
Food prices (y / y in%) 4.6% 0.9% 1.2%
Fuel prices (y / y in%) 9.8% 7.0% -2.0%
Regulated prices and tax (y / y in%) 4.7% 10.0% 2.1%
3M PRIBOR (average) 1.19% 1.17% 1.15%
2W Repo (average) 0.75% 0.75% 0.75%
EUR / CZK (average) 24.6 25.2 24.1

Source: Commercial Bank

Filip Sušanka,

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