World Economic outlook - Czech Republic economic outlook 2012-2013 : The Czech Republic has adopted the budget for 2012, one of austerity, which relates to reducing the deficit by taking some unpopular measures. Next year’s target for the budget deficit is 3.5% of GDP, 0.9% less than current year. The budget sets the shortfall limit at 105 billion koruna ($5.3 billion), after a gap of 135 billion koruna planned for this year.
Although they are ready to implement an austerity package, the Czech government officials anticipates a GDP growth of 2.5%, but the Opposition says this figure is not realistic.
In a report issued by the European Commission, the Czech economy slowed down in 2011 and will have only an increase of 1.8%. Furthermore, forecasts for 2012 – 2013 are uncertain, because the euro area sovereign debt crisis. European Commission foresees a growth of only 0.7%, down with 0.8% compare with 2011.
What could happen in the Czech Republic:
- Domestic growth factors are expected to remain weak over the first half of the forecast horizon.
- Private consumption expenditure will continue to be restrained by fiscal measures
- The construction activity will be discouraged by the new 17,5% VAT tax
- The economic slowdown will put pressure on the labour market, because 2012 will bring job cuts in the public sector and hiring in the public sector will be put on hold
- The inflation will rise due to the increase of the VAT Tax
- The increase of the VAT tax is expecting to bring 0,7% of GDP
“Nobody is able to estimate now how the euro zone will deal with the crisis and what its impact will be on the Czech economy. A mild recession of one or two percent is a possible scenario. The priority will be to fulfill the fiscal strategy of reducing the deficit”, told the Czech Finance Minister, Miroslav Kalousek.
Koruna, the Czech currency, fell with 2,4% this year, less than forint – minus 8,4% – and the zloty – minus 13%. source http://expat-times.com
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