Macroeconomic Forecast Czech Republic

Czech gross external debt fell to EUR55.2bn at the end of Q109, from EUR58.2bn (39.1% of GDP) at end-2008. This correlates with our view for the deleveraging process to gather traction throughout emerging Europe - even in a comparatively stable economy such as the Czech Republic - as foreign capital availability dwindles. We forecast the country's external debt to continue steadily declining throughout 2009, with an end-year target of EUR50.5bn. However, we caution that due to the recession already underway in the Czech Republic, this will only result in a small contraction in proportion of GDP terms, to 38.9%.

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