Macroeconomic Forecast - July 2014

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

Published

  • Macroeconomic Forecast
  • Statistics

ISSN 1804‐7971

Summary of the Forecast

Real GDP increased by 0.8% QoQ in the first quarter of 2014 (gross value added rose at an even faster pace, by 1.1% QoQ), which far surpassed the estimate from the April Macroeconomic Forecast. We have therefore revised the forecast for GDP growth in 2014 up to 2.7%. Such a substantial change – 1.0 pp – is almost exclusively due to better than expected developments in the first quarter. The economy should continue to grow at a moderate pace also in 2015, when GDP could increase by 2.5%. Main expenditure components should all contribute positively to GDP growth in both 2014 and 2015. Domestic demand should account for roughly three quarters of the growth, while balance of foreign trade for the remaining part.

Despite the weakening of the Czech koruna due to the CNB’s foreign exchange interventions, the year 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. Average inflation rate could thus reach 0.6% this year. Consumer price growth should accelerate in 2015, but we assume that inflation will still be hovering below the CNB’s inflation target.

Much better than previously estimated economic developments in the first quarter of 2014, which led to the change in the forecast for GDP, were also reflected in the improvement in expected developments on the labour market. Compared to the April Macroeconomic Forecast, we assume a faster decline in unemployment rate, which could average 6.1% in 2015. Also, employment should grow stronger in 2014 than we thought so far.
Total wage bill could increase by 2.8% this year. In 2015 we expect its growth to accelerate to 3.8%. A proposed increase in the wage bill in state administration, apart from an expected gradual improvement in the state of the private sector, should impact positively on total wage bill.

We expect the government sector to post a deficit of 1.5% of GDP this year. The balance should thus remain unchanged from the previous year. At the same time, the government sector debt should decline by 2.0 pp to 44.0% of GDP.

For the first time since 1993, the current account of the balance of payments could post a small surplus this year, mainly thanks to positive developments in the trade balance. In 2015, the current account should be balanced.

We regard risks to the Forecast as balanced.



2010 2011 2012 2013 2014 2015 2013 2014 2015
Current forecast  Previous forecast
Main Macroeconomic Indicators
Gross domestic product bill. CZK 3 791 3 823 3 846 3 884 4 061 4 216 3 884 4 023 4 173
Gross domestic product growth in %, const.pr. 2,5 1,8 -1,0 -0,9 2,7 2,5 -0,9 1,7 2,0
Consumption of households growth in %, const.pr. 0,9 0,5 -2,1 0,1 1,6 1,4 0,1 0,6 1,5
Consumption of government growth in %, const.pr. 0,2 -2,7 -1,9 1,6 1,9 1,6 1,6 0,8 0,7
Gross fixed capital formation growth in %, const.pr. 1,0 0,4 -4,5 -3,5 4,1 3,5 -3,5 2,7 2,0
Contr. of foreign trade to GDP growth p.p., const.pr. 0,6 1,9 1,7 -0,3 0,6 0,5 -0,3 0,5 0,6
Contr. of increase in stocks to GDP growth p.p., const.pr. 1,0 0,1 -0,1 -0,2 0,0 0,2 -0,2 0,2 0,1
GDP deflator growth in per cent -1,6 -0,9 1,6 1,9 1,8 1,3 1,9 1,8 1,7
Average inflation rate per cent 1,5 1,9 3,3 1,4 0,6 1,7 1,4 1,0 2,3
Employment (LFS) growth in per cent -1,0 0,4 0,4 1,0 0,5 0,2 1,0 0,2 0,2
Unemployment rate (LFS) average in per cent 7,3 6,7 7,0 7,0 6,4 6,1 7,0 6,8 6,6
Wage bill (domestic concept) growth in %, curr.pr. 0,8 2,2 1,8 -0,9 2,8 3,8 -0,9 1,8 3,5
Current account / GDP per cent -3,9 -2,7 -1,3 -1,4 0,4 0,0 -1,4 -0,4 -0,3
Assumptions:                    
Exchange rate CZK/EUR   25,3 24,6 25,1 26,0 27,4 27,4 26,0 27,3 27,2
Long-term interest rates % p.a. 3,7 3,7 2,8 2,1 1,9 2,4 2,1 2,4 2,6
Crude oil Brent USD/barrel 80 111 112 109 108 104 109 105 101
GDP in Eurozone (EA-12) growth in %, const.pr. 1,9 1,6 -0,6 -0,4 1,1 1,6 -0,4 1,1 1,5

Tables and Graphs

Macroeconomic Forecast in a Nutshell

Structure of the presentation

Summary of the Forecast

Risks to the Forecast

  • Forecast Assumptions
    • External Environment
    • Fiscal Policy
    • Monetary Policy, Financial Sector and Exchange Rates
    • Structural Policies
    • Demographic Trends
  • Economic Cycle
    • Position within the Economic Cycle
    • Business Cycle Indicators
  • Forecast of the Development of Macroeconomic Indicators
    • Economic Output
    • Prices
    • Labour Market
    • External Relations
    • International Comparisons
  • Monitoring of Other Institutions’ Forecasts

Tables and Graphs

  • Economic Output
  • Prices
  • 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 4 July 2014. No political decisions, newly released statistics, or world financial or commodity market developments could have been taken into account after this date.