Country Risk Service Czech Republic Updater
The Economist Intelligence Unit, April 2013, Pages: 20
The Czech Republic is governed by a two-party centre-right coalition comprising the Civic Democratic Party (ODS, the largest party) and the TOP 09, with support from a small liberal-democratic party, LIDEM. Tensions persist within the government, especially now that it no longer commands a decisive parliamentary majority. Public confidence in the government and leading politicians is low. Political and social instability is rising as a result of the ongoing austerity drive. Real GDP contracted by an estimated 1.2% in 2012, owing to the adverse impact of fiscal consolidation on domestic demand, together with faltering external demand among trading partners in the euro zone. The Economist Intelligence Unit forecasts stagnation in the domestic economy, with growth of just 0.1% in 2013. Real GDP growth is forecast to average 2.2% per year in 2013­17, which is sluggish compared with the rates achieved in 2003-07.
We expect pressure on the government to remain intense, particularly from the leading left-wing opposition party, the Czech Social Democrats (CSSD), which is already gearing up for the next election, scheduled in 2014.
The government remains committed to narrowing the deficit to less than 3% of GDP this year. Better than expected budgetary performance in the first quarter of 2013, thanks to a surprise uptick in consumer spending, means that the government is likely to meet its target this year, although the risk of fiscal slippage persists owing to sluggish economic performance.
Country Risk Service Czech Republic Updater
Czech Republic at a glance: 2013-17
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Risk assessment
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Rating definitions
Sovereign risk
Currency risk
Banking sector risk
Political risk
Economic structure risk
Overall country risk
Central scenario for 2013-17: Political stability
Central scenario for 2013-17: Election watch
Central scenario for 2013-17: International relations
Central scenario for 2013-17: Policy trends
Central scenario for 2013-17: Fiscal policy
Central scenario for 2013-17: Monetary policy
Central scenario for 2013-17: Economic growth
Central scenario for 2013-17: Inflation
Central scenario for 2013-17: Exchange rates
Central scenario for 2013-17: External sector
Key risk indicators
Ratings summary
Quarterly indicators
International assumptions summary
Economic structure
Public finances
Exchange rates, interest rates and prices
Financial sector
Current account
International liquidity
Foreign payment and liquidity indicators
External trade
External financing requirement
External debt stock
External debt service
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