Macroeconomic Forecast Czech Republic

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The Czech Republic's balance of payments position has corrected sharply during the first half of the year, with the current account deficit narrowing by around 75% y-o-y. Moreover, we believe that our full-year forecast remains on target, with a deficit of 1.6% of GDP pencilled in for 2009. Beyond this year, we expect the current account to remain in the red, though expect a more modest shortfall, between 1-2% of GDP, to prevail over the medium term. In the meantime, we continue to stress that external financing risks remain, which may lend further instability to balance of payments dynamics.