OECD lowers Czech GDP estimate

The Paris-based OECD’s outlook for the Czech economy is still more optimistic than forecasts by the EU and Finance Ministry

The OECD has revised downwards its forecast for Czech GDP growth in 2011 to 2.4 percent from 2.8 percent predicted last November. At the same time, the OECD has raised its growth prognosis for 2012 from 3.2 percent to 3.5 percent. Its forecast for the Czech economy is more optimistic than that of both the Czech Ministry of Finance and the EU.

“Despite ongoing fiscal tightening real GDP growth is expected to reach 2.4 percent this year, driven primarily by strong foreign demand. Growth will broaden and rise further to 3.5 percent in 2012, as consumption picks up,” the Organisation for Economic Co-operation and Development said.

“Headline inflation will spike temporarily due to scheduled indirect tax increases in 2012, but core inflation will remain low given the remaining output gap,” the Paris-based group said.

“The authorities should continue with fiscal tightening to achieve medium-term targets and use the upswing of the economy as an opportunity to secure the long-term sustainability of pension and healthcare systems. Monetary policy should normalize gradually as the recovery takes stronger hold.”

Earlier this month, the European Commission revised downwards its GDP forecast for the Czech Republic to 2 percent from 2.3 percent and, in contrast to the OECD, lowered its prognosis for 2012 from 3.1 percent to 2.9 percent.

The Czech Ministry of Finance lowered its GDP forecast for 2011 in mid-April from 2.2 percent to 1.9 percent, and from 2.7 percent to 2.3 percent for 2012.  

The OECD predicts that in 2011 the global economy will grow by 4.2 percent compared to 4.9 percent in 2010. The organization’s current forecast for global growth in 2012 is 4.6 percent.