Macroeconomic Forecast - January 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 rose by 0.2% QoQ in Q3 2013, but it continued to fall in annual terms. We estimate that economic recovery continued also at the end of 2013. Nonetheless, GDP probably decreased by 1.4% in the whole of 2013, in particular due to a decline in fixed capital investment. However, with positive contribution from both domestic demand and foreign trade, the economy may grow by 1.4% in 2014. In 2015, GDP growth could accelerate to 2.0%.
Despite a 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 effects (especially a decrease in electricity prices) should have an anti-inflationary impact throughout 2014. The inflation rate could thus reach 1.0% this year. In 2015, consumer price growth could accelerate to 2.4% in relation to the economic recovery and delayed effects of the weakened koruna.
Employers’ efforts to increase labour productivity by rationalizing the number of employees should lead to a de facto stagnation of employment in both 2014 and 2015. We also expect an impact on the unemployment rate (LFS), which should fluctuate around 7%, in spite of gradual economic growth.

In 2014, the wage bill could increase by 2.2%. For 2015 we expect growth to accelerate to 4.3%. The planned transfer of 2 pp of the statutory health insurance contribution rate from employers to employees is expected to be partially compensated by an increase in employees’ wages.
We estimate that the government sector deficit reached 2.5% of GDP in 2013. It should be well below 3% of GDP also in 2014. The deficit adjusted for the impact of the business cycle and one-off and temporary measures was probably only 1.2% of GDP in 2013. For the first time in history, therefore, the structural balance has nearly reached the level of the medium-term budgetary objective for the Czech Republic.
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
Current forecast Previous forecast
Main Macroeconomic Indicators
Gross domestic product growth in %, const.pr. 2,5 1,8 -1,0 -1,4 1,4 2,0 -1,0 1,3
Consumption of households growth in %, const.pr. 0,9 0,5 -2,1 -0,2 0,6 1,5 0,2 0,9
Consumption of government growth in %, const.pr. 0,2 -2,7 -1,9 1,6 1,0 0,4 0,8 0,2
Gross fixed capital formation growth in %, const.pr. 1,0 0,4 -4,5 -4,8 -0,3 2,6 -4,8 -0,8
Contr. of foreign trade to GDP growth p.p., const.pr. 0,6 1,9 1,7 -0,2 0,7 0,5 0,6 0,6
Contr. of increase in stocks to GDP growth p.p., const.pr. 1,0 0,1 -0,1 -0,2 0,3 0,1 -0,7 0,4
GDP deflator growth in per cent -1,6 -0,9 1,6 1,6 1,7 1,3 1,2 0,5
Average inflation rate per cent 1,5 1,9 3,3 1,4 1,0 2,4 1,4 0,7
Employment (LFS) growth in per cent -1,0 0,4 0,4 0,9 0,1 0,1 1,2 0,4
Unemployment rate (LFS) average in per cent 7,3 6,7 7,0 7,0 7,0 6,9 7,1 7,3
Wage bill (domestic concept) growth in %, curr.pr. 0,8 2,2 1,8 -0,2 2,2 4,3 0,8 2,5
Current account / GDP per cent -3,9 -2,7 -2,4 -1,7 -0,2 -0,4 -1,7 -1,4
Assumptions:
Exchange rate CZK/EUR 25,3 24,6 25,1 26,0 27,3 27,2 25,8 25,8
Long-term interest rates % p.a. 3,7 3,7 2,8 2,1 2,4 2,5 2,1 2,4
Crude oil Brent USD/barrel 80 111 112 109 104 101 108 103
GDP in Eurozone (EA-12) growth in %, const.pr. 1,9 1,6 -0,6 -0,4 0,9 1,5 -0,3 1,0

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
    • structural reforms
  • Economic Cycle
  • Forecast of Macroeconomic Indicators
    • economic output
    • inflation
    • labour market
    • external relations

Preparation of the Macroeconomic Forecast


  • Updated: 25.07.2013

Evaluation of Forecasting History at the Ministry of Finance


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  • Updated: 31.1.2014

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 16 January 2014. No political decisions, newly released statistics, or world financial or commodity market developments could have been taken into account after this date.