Macroeconomic Forecast - January 2014
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 | ||||||||
| 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 |
- Risks to the Forecast - January 2014PDF (84kB)
- A - Forecast Assumptions - January 2014PDF (366kB)
- B - Economic Cycle - January 2014PDF (209kB)
- C - Forecast of the Development of Macroeconomic Indicators - January 2014PDF (258kB)
- D Monitoring of Other Institutions Forecasts - January 2014PDF (112kB)
Tables and Graphs
- Tables and Graphs - January 2014PDF (380kB)
- C.1 - Economic Output - January 2014PDF (168kB)
- C.2 - Prices - January 2014PDF (166kB)
- C.3 - Labour Market January - 2014PDF (158kB)
- C.4 - External Relations - January 2014PDF (154kB)
- C.5 - International Comparisons - January 2014PDF (144kB)
Macroeconomic Forecast in a Nutshell
Structure of the presentation
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Forecast Assumptions
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risks of the forecast
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external environment
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fiscal policy
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monetary policy, the financial sector and foreign exchange rates
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structural reforms
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Economic Cycle
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Forecast of Macroeconomic Indicators
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economic output
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inflation
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labour market
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external relations
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Preparation of the Macroeconomic Forecast
- Updated: 25.07.2013
Evaluation of Forecasting History at the Ministry of Finance
- Macroeconomic Forecasts at the MoF - A Look into the Rear view Mirror - July 2013PDF (184kB)
- AnalytIQ - tools to assess the MoF forecasts accuracy and much more - January 2014ZIP (298kB)
- To run, the application requires Microsoft Excel 2010 or Microsoft Excel 2007. Macros need to be enabled.
- Updated: 31.1.2014
Information
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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.
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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.