Press release

Ministry of Finance of the Czech Republic releases on its web pages new Macroeconomic Forecast.

The world economy is slowly emerging from a recession that resulted from the crisis on financial markets. The recovery remains fragile, though, and future development is subject to many risks. Czech economy, due to Q-o-Q GDP growth since Q2 2009, has also left the contraction phase. Nevertheless, we estimate that gross domestic product dropped by 4 % in 2009.

Economic activity is expected to pick up slightly by 1.3 % in 2010. Growth structure will be influenced by recovery of our main trading partners’ economies. Therefore, GDP growth should be driven mainly by foreign trade. Under current assumptions, GDP growth should accelerate to 2.6 % in 2011.

We estimate the average rate of inflation around 2.0 % both in 2010 and 2011, i.e. close to the CNB’s inflation target.

Diminished economic activity adversely impacts on the labour market. After an unprecedented rise of unemployment rate (LFS) from 4.4 % in 2008 to the estimated 6.7 % in 2009, the peak should be reached in 2010 at approximately 8.8 %. Unemployment rate should start declining mildly thereafter. At the same time, employment should decrease by 1.8 % this year and stagnate in 2011. Contrary to previous years, when total wage bill was rising sharply, we expect it to drop by 0.7 % in 2010. In 2011, wage bill growth should rebound to 4.5 %.

Current account to GDP ratio should remain on a sustainable level. In 2010, current account could, for the first time since 1993, move into surplus.

In 2009, general government deficit reached 6.6 % of GDP, according to preliminary estimates. There is no change to the October forecast, although the estimate is subject to highly uncertain development of, above all, tax receipts, in particular from corporate income tax. Fiscal policy stance for 2010 corresponds to the planned general government deficit of 5.3 % of GDP.