Czech Republic

RGE's Q1 2010 Czech Republic Outlook

The Czech economy is on the road to recovery, but that road will likely be long and bumpy. In contrast to average annual growth rates of over 5% from 2003-08, GDP fell an estimated 4.5% in 2009. As a highly open economy, the collapse in external demand hit the Czech Republic particularly hard. Policymakers responded with massive fiscal and monetary stimulus. Quarterly developments highlight the gradual revival underway. After tentatively emerging from recession in Q2 2009, eking out 0.2% q/q growth, the economy gained momentum, growing 0.8% q/q in Q3. The Q2 2009 growth upturns in eurozone heavyweights France and Germany lent support.

The Czech Republic has few macroeconomic vulnerabilities. Its low current account deficit of around 1% of GDP in 2009, low (albeit rising) public debt level, sound banking sector and scant levels of foreign currency-denominated lending all bode well for the economy’s recovery prospects. Nevertheless, there are risks to the recovery. The major risk to...

Read the Q1 2010 Czech Republic Outlook.