GDP shrink is possible for 2010 too



According to a revised estimate of the Ministry of Finance the Czech economy is likely to contract by 4.3 percent this year, which would be the steepest decline in GDP in the history of the Czech Republic. Three months ago the ministry predicted a considerably milder contraction of 2.3 percent in 2009. The minister of finance, Eduard Janota, said that the government would have to re-evaluate next year’s budget in the light of the new estimate.


The Finance Ministry expects the economy to grow next year by 0.3 percent, which again is a worse outlook than April’s prediction of 0.8 percent growth in 2010.



Analysis and forecast (↑ increasing risk)


The economic trends are quite gloomy in the country, and though the revised forecasts are more realistic than the previous ones, the growth expectation for next year still seems too optimistic. According to fresh data the value of public construction orders in the first half of 2009 fell by 37% compared with the last half of 2008 (which means it is not year-on-year data). Experts from the engineering and consultancy firm IS, which released the analysis, stated they do not expect the situation to develop for the better in the next period either, saying they anticipate a year-on-year decline in public building orders of 10-15%.


All countries in the region have been forced to revise their forecasts in the last few months, the new Czech government, the formation of which is due in October 2009 is expected to cut the 2010 expectations.


(See also the item at the Slovakian part, mentioning the failure of car-scrapping bonus in the Czech Republic)