Macroeconomic Forecast Czech Republic

August 2006 | Macroeconomic Forecasts

BMI View: The current account deficit deteriorated sharply in July, reaching a cumulative US$1.86bn (EUR1.46bn), compared to US$0.40bn (EUR0.35bn) at the same point in 2005. This was despite measuring a similar trade surplus to last year, and occurred mainly due to a sharp worsening in the services, income and transfer accounts. The downturn in the current account was more severe than anticipated, and we have adjusted our end-year deficit forecast accordingly, to US$3bn from a previous US$2.9. That said, this still only represents 2.3% of expected GDP and is therefore no threat to stability, especially as net FDI covers the vast majority of the shortfall. Going forward, export growth will continue to be underpinned by the booming automotive industry and recovery in the eurozone, and we expect the external deficit to decline over the forecast period, both in nominal value and relative to GDP.

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