Macroeconomic Forecast - April 2014

Dept 37 - Economic Policy Department
Dept 37 - Economic Policy Department

Published

  • Macroeconomic Forecast
  • Statistics

ISSN 1804‐7971

Summary of the Forecast

According to the CZSO’s current data, real GDP decreased by 0.9% in the whole of 2013. The surprisingly strong QoQ growth of 1.8% in Q4 2013 was largely a product of one-off factors (stockpiling cigarette tax stamps as a consequence of an increase in the excise tax on cigarettes as of 1 January 2014). This will be negatively reflected in growth particularly in Q1 2014; however, gradual economic recovery should continue. GDP could increase by 1.7% in 2014, while in 2015 growth could accelerate to 2.0%. In both 2014 and 2015, all expenditure components should contribute positively to economic growth. Domestic demand should account for two thirds of economic growth and foreign trade balance for the remainder.

Despite the weakening of the Czech koruna due to the CNB’s foreign exchange interventions, 2014 should be characterized by very low inflation. Unlike in previous years, administrative measures (especially a decrease in electricity prices) should have an anti-inflationary impact throughout 2014. Inflation rate could thus reach 1.0% this year. In 2015, consumer price growth could accelerate to 2.3% in relation to the economic recovery and delayed effects of the weaker koruna. The planned introduction of the third VAT rate of 10% for selected goods and services, which is expected to take effect in 2015, together with the abolition of regulatory fees for visit to a doctor, will have a slight anti-inflationary impact.

Employers’ efforts to increase labour productivity should lead to only minimal growth of employment in both 2014 and 2015. We also expect an impact on the unemployment rate (LFS), which should in both years decrease only slightly, in spite of gradual economic growth.

In 2014, the wage bill could increase by 1.8%; for 2015 we expect growth to accelerate to 3.5%.
According to the CZSO’s preliminary estimate, the government sector deficit reached 1.4% of GDP in 2013. In spite of the negative output gap, fiscal effort reached 1.3 pp. In 2014, an expansionary fiscal policy leading to a deficit of around 1.8% of GDP is expected. In 2013, the government sector debt as a percentage of GDP decreased slightly to 46%. In 2014, we expect it to fall further to 44% because of changes in liquidity management.
Owing in particular to the favourable development of the foreign trade balance, we expect that the current account deficit of the balance of payments will be negligible in 2014 and 2015.

We regard the forecast risks as balanced.



2010 2011 2012 2013 2014 2015 2013 2014 2015
Current forecast  Previous forecast
Main Macroeconomic Indicators
Gross domestic product growth in %, const.pr. 2,5 1,8 -1,0 -0,9 1,7 2,0 -1,4 1,4 2,0
Consumption of households growth in %, const.pr. 0,9 0,5 -2,1 0,1 0,6 1,5 -0,2 0,6 1,5
Consumption of government growth in %, const.pr. 0,2 -2,7 -1,9 1,6 0,8 0,7 1,6 1,0 0,4
Gross fixed capital formation growth in %, const.pr. 1,0 0,4 -4,5 -3,5 2,7 2,0 -4,8 -0,3 2,6
Contr. of foreign trade to GDP growth p.p., const.pr. 0,6 1,9 1,7 -0,3 0,5 0,6 -0,2 0,7 0,5
Contr. of increase in stocks to GDP growth p.p., const.pr. 1,0 0,1 -0,1 -0,2 0,2 0,1 -0,2 0,3 0,1
GDP deflator growth in per cent -1,6 -0,9 1,6 1,9 1,8 1,7 1,6 1,7 1,3
Average inflation rate per cent 1,5 1,9 3,3 1,4 1,0 2,3 1,4 1,0 2,4
Employment (LFS) growth in per cent -1,0 0,4 0,4 1,0 0,2 0,2 0,9 0,1 0,1
Unemployment rate (LFS) average in per cent 7,3 6,7 7,0 7,0 6,8 6,6 7,0 7,0 6,9
Wage bill (domestic concept) growth in %, curr.pr. 0,8 2,2 1,8 -0,9 1,8 3,5 -0,2 2,2 4,3
Current account / GDP per cent -3,9 -2,7 -1,3 -1,4 -0,4 -0,3 -1,7 -0,2 -0,4
Assumptions:
Exchange rate CZK/EUR 25,3 24,6 25,1 26,0 27,3 27,2 26,0 27,3 27,2
Long-term interest rates % p.a. 3,7 3,7 2,8 2,1 2,4 2,6 2,1 2,4 2,5
Crude oil Brent USD/barrel 80 111 112 109 105 101 109 104 101
GDP in Eurozone (EA-12) growth in %, const.pr. 1,9 1,6 -0,6 -0,4 1,1 1,5 -0,4 0,9 1,5

Tables and Graphs

Macroeconomic Forecast in a Nutshell

Structure of the presentation

  • Forecast Assumptions
    • risks of the forecast
    • external environment
    • fiscal policy
    • monetary policy, the financial sector and foreign exchange rates
    • policy statement of the government ‐ priorities
  • Economic Cycle
  • Forecast of Macroeconomic Indicators
    • economic output
    • inflation
    • labour market
    • external relations
    • international comparisons

Preparation of the Macroeconomic Forecast


  • Updated: 25.07.2013

Evaluation of Forecasting History at the Ministry of Finance


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Information

  • The Macroeconomic Forecast is prepared by the Financial Policy Department of the Czech Ministry of Finance on a quarterly basis. It contains a forecast for the current and following years (i.e. until 2015) and for certain indicators an outlook for another 2 years (i.e. until 2017). As a rule, it is published in the second half of the first month of each quarter.
  • Any comments or suggestions that would help us to improve the quality of our publication and closer satisfy the needs of its users are welcome. Please direct any comments to the following email address: macroeconomic.forecast(at)mfcr.cz
  • Cut-off Date for Data Sources:
    The forecast was made on the basis of data known as of 1 April 2014. No political decisions, newly released statistics, or world financial or commodity market developments could have been taken into account after this date.