Macroeconomic Forecast - October 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 latest data, which are based on the national accounts standard ESA 2010 and reflect other methodical changes, real GDP increased by 0.3% QoQ in the second quarter of 2014. Compared with the first quarter of 2014, there was some slowdown of growth but this was in line with expectations. We, therefore, still hold the view that the economy should continue to grow at a moderate pace. Real GDP could increase by 2.4% YoY this year and maintain similar dynamics also in 2015. Growth in both years should be driven exclusively by domestic demand; the contribution of net exports should be close to zero.

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 0.5% this year. Consumer price growth should accelerate in 2015, but we assume that inflation will still be hovering below the CNB’s inflation target.

Compared with the previous Macroeconomic Forecast, the forecast for labour market developments changed only little. Thanks to the gradual pick-up in economic activity, the unemployment rate should be declining moderately, whereas employment should be modestly rising.

Total wage bill could increase by 2.9% this year. In 2015 we expect its growth to accelerate to 3.9%. 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. In absolute terms, the balance should slightly deteriorate compared with the last year, but the deficit will remain well below 3% of GDP. Owing to an improved liquidity management, the government sector debt should decrease by 1.8 pp to 43.9% of GDP. A deficit of 2.4% of GDP, given partially by a one-off inclusion of the lease of JAS 39 Gripen jet fighters, is expected for the next year.

Current account of the balance of payments should be balanced this year; in 2015 it could post a small deficit. Further increases of the balance of trade surplus will be compensated for by the continued deepening of the income balance deficits.

We regard risks to the Forecast as balanced.



2010 2011 2012 2013 2014 2015 2013 2014 2015
Current forecast  Previous forecast
Table: Main Macroeconomic Indicators
Gross domestic product bill. CZK 3 954 4 022 4 048 4 086 4 284 4 467 3 884 4 061 4 216
Gross domestic product growth in %, const.pr. 2,3 2,0 -0,8 -0,7 2,4 2,5 -0,9 2,7 2,5
Consumption of households growth in %, const.pr. 1,0 0,2 -1,8 0,4 1,4 1,7 0,1 1,6 1,4
Consumption of government growth in %, const.pr. 0,4 -2,9 -1,0 2,3 1,9 2,0 1,6 1,9 1,6
Gross fixed capital formation growth in %, const.pr. 1,3 1,1 -2,9 -4,4 4,5 4,9 -3,5 4,1 3,5
Contr. of foreign trade to GDP growth p.p., const.pr. 0,5 1,9 1,3 0,0 -0,1 0,0 -0,3 0,6 0,5
Contr. of increase in stocks to GDP growth p.p., const.pr. 0,8 0,2 -0,2 -0,2 0,4 0,0 -0,2 0,0 0,2
GDP deflator growth in per cent -1,5 -0,2 1,4 1,7 2,4 1,8 1,9 1,8 1,3
Average inflation rate per cent 1,5 1,9 3,3 1,4 0,5 1,5 1,4 0,6 1,7
Employment (LFS) growth in per cent -1,0 0,4 0,4 1,0 0,4 0,3 1,0 0,5 0,2
Unemployment rate (LFS) average in per cent 7,3 6,7 7,0 7,0 6,3 6,1 7,0 6,4 6,1
Wage bill (domestic concept) growth in %, curr.pr. 0,6 2,2 2,1 -0,4 2,9 3,9 -0,9 2,8 3,8
Current account / GDP per cent -3,7 -2,6 -1,3 -1,4 0,0 -0,3 -1,4 0,4 0,0
Assumptions:                    
Exchange rate CZK/EUR   25,3 24,6 25,1 26,0 27,5 27,5 26,0 27,4 27,4
Long-term interest rates % p.a. 3,7 3,7 2,8 2,1 1,7 1,7 2,1 1,9 2,4
Crude oil Brent USD/barrel 80 111 112 109 105 101 109 108 104
GDP in Eurozone (EA-12) growth in %, const.pr. 1,9 1,6 -0,6 -0,4 0,7 1,1 -0,4 1,1 1,6

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

Preparation of the Macroeconomic Forecast


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