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General situation and outlook
Since the end of 2009, the economy has started to pick up again, mainly thanks to a recovery in exports, which have been growing continuously since November 2009 and increased 11.1% in the period January to April 2010. However, the economic recovery is still very modest, with demand from the main EU markets low and domestic demand about to decrease again. The construction sector is still the economy’s problem child, with output continuing to decrease year-on-year in April 2010 (by 15.3%). As a result, for 2010, GDP growth of just 0.9% is forecast.
The Czech Republic’s public finances are stable, with only moderate public sector debt (40% of GDP), but a new government will have to raise taxes and curb government spending to reduce the increased budget deficits of nearly 6% of GDP in 2009 and more than 5% of GDP in 2010. The parties of the new coalition government have announced an immediate start on a new budget, with the aim of cutting the budget deficit to 3% of GDP by 2013.
GDP growth is projected to recover further in 2011 (3%), but this depends largely on a further upswing in export markets (especially automotive demand from Russia and Asia). Its good liquidity and solvency position are shielding the country from potential external funding problems. Despite some vulnerability to global market sentiments, we do not expect the koruna to fall victim to extreme volatility.
Real GDP growth (%)
Fiscal balance (% of GDP)
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General Information
Capital: Prague
Government type: Parliamentary Democracy
Currency: Czech Koruna (CZK)
Population: 10.3 million
Status: Upper middle income country
(GDP/capita: US-$18,037 in 2010)
Main import sources (2009)
- Germany: 26.6%
- China: 10.0%
- Poland: 6.4%
- Slovakia: 5.4%
Main export markets (2009)
- Germany: 32.3%
- Slovakia: 9.0%
- Poland: 5.8%
- France: 5.6%
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Date: June 2010
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