Macroeconomic Forecast Czech Republic

January 2007 | Macroeconomic Forecasts

BMI View: GDP growth moderated rather sharply in Q306 to 5.8% year-on-year (y-o-y). A downward revision of data in Q1 and Q2, to 6.4% and 6.0% respectively, has resulted in a cumulative expansion of 6.1% in Q1-3. This slowdown is attributed to both a fall in government consumption (-2.6% y-o-y in Q3), and declining - though still positive - influence of net exports. The latest data have prompted us to adjust our full-year GDP growth forecast for 2006 downward slightly, to 5.9% from a previous 6.1%. This reflects an anticipated further deceleration in Q4. Encouragingly, for sustainable medium-term growth, gross fixed capital formation expanded 6.7% y-o-y over the first nine months, the fastest rate since 2000. As domestic demand gradually takes over from exports as the principle driver of economic activity over the next few years, private sector consumption and investment must sustain a robust rate of growth, particularly as a widening budget deficit will likely require further cuts to state spending.

If you would like to subscribe to Central Europe & Baltic States Monitor and gain instant access to this article, please click here to subscribe.

If you would like to take a trial to Central Europe & Baltic States Monitor please click on the trial link below.