Country Report Czech Republic January 2009

Outlook for 2009-10

• The centre-right ruling coalition, comprising the Civic Democratic Party (ODS), the Christian Democratic Union-Czechoslovak People's Party (KDU-CSL) and the Green Party, looks likely to survive, at least in the short term.
• Politically, it will be increasingly difficult to introduce deeper structural reforms, owing to the proximity of the general election scheduled for 2010, as well as a lack of consensus in the ruling coalition and in the ODS.
• There is a threat to the government's stability, owing to a possible internal rebellion within the ODS.
• The Economist Intelligence Unit's outlook for the euro zone in 2009-10 is pessimistic. Based on this, as well as sharply falling consumer and business confidence, we forecast a sharp slowdown in Czech real GDP growth in 2009, to 0.8%, from 4.2% in 2008. A modest recovery is expected in 2010.
• Inflation in 2008 was driven by increases in regulated prices and indirect taxes, but it will fall from 2009 as these work their way through the economy.
• We forecast that the current-account deficit will average around 3% of GDP during the forecast period.

Monthly review

• The prime minister, Mirek Topolanek, was re-elected party leader at the ODS's congress in December.
• The ODS is likely to reach a stability agreement with the opposition Czech Social Democratic Party (CSSD), ensuring political stability during the country's holding of the EU presidency, from January to June 2009.
• In late November the Constitutional Court ruled that the EU's Lisbon treaty did not contradict the Czech constitution.
• The 2009 budget gained parliamentary approval in its second and third readings in December 2008, with the president, Vaclav Klaus, signing it into law later in the same month.
• The government and the Czech National Bank (CNB, the central bank) have prepared an emergency stimulus package, with additional proposals outlined in the event that real GDP growth falls below 2% in 2009.
• Retail and commercial clients are facing worsening access to credit and higher interest rates, as risk assessment become stricter and risk premiums go up.

Source: Country Report

This report covers the following industry codes:
SIC Code: 13;37;53;49;60;2834;80;48;70;47;59
NAICS Code: 211;336;44;22;52;3254;62;517;72;48

This report covers the following industry codes:
SIC Code: 13;37;53;49;60;2834;80;48;70;47;59
NAICS Code: 211;336;44;22;52;3254;62;517;72;48