Economic policy / Macroeconomic Indicators, Economic Growth
This section reports on economic policy initiatives of the Czech government, the EU, and other entities that have a direct impact on the competitiveness of the country. It also includes information on economic priorities of the AmCham and other leading associations.
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Spotlight issue
CSOB: Germany vs. Slovakia: Which demand helps the Czech economy more?
According to CSOB bank analysts, investors in the markets believe that governments are doing big things to restart the economy. And partially, they are right. Public finance deficits in the largest European economies, similarly to the Czech Republic, may reach around 10% of GDP this year. The problem is that behind much of the deficit there will be the net drop in tax revenue or measures to keep the temporarily “unemployed employees” at work – i.e. a smarter form of unemployment benefit. This does not mean that these measures do not count.
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Central and Eastern Europe: The worst seems to be behind us
CEE economies are bracing themselves for a slow recovery. But as unemployment is set to rise and high inflation isn't an issue any longer, more monetary easing is on the way. In FX, RUB prospects remain bright while CZK remains our favourite CEE low yielder. Poland central bank's aggressive steps should translate into a further steepening of PLN swap curve.
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Lower CZGB supply in second half of year
The government is proposing a further increase in the state budget deficit to CZK500bn. The main reason is the rise in spending to support the economy at this time of crisis. In our opinion, however, the government will continue to have problems implementing expenditure plans, which will lead to a deficit of only CZK400bn. This also implies less additional CZGB issuance, further reduced by using state financial assets and the drawdown of EUR loan programs. In our view, the MinFin has only CZK56.7bn left to issue by the end of the year, which shouldn’t be a problem to place.
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