Country Forecast Czech Republic
The Economist Intelligence Unit, August 2012, Pages: 55
The Czech Republic is governed by a two-party centre-right coalition with support from a new faction, LIDEM. Tensions persist within the government, as its parliamentary majority has been significantly weakened. This has served to put the implementation of fiscal consolidation under considerable strain. Public confidence in the government is low, and social unrest is rising as a result of the ongoing austerity drive, which the government intends to stretch out over 2012-15 in response to slowing growth prospects for the domestic economy. Real GDP is expected to contract by 0.3% in 2012, owing to the adverse impact of fiscal austerity on domestic demand, combined with faltering external demand among trading partners in the euro zone. Economic growth is forecast to average 2% per year in 2013-16, which is sluggish compared with 2003-07.
The pace of fiscal consolidation is expected to ease following an announcement by the government on July 19th. This is likely to heighten the prospects for political stability in the near term. However, the government remains under pressure in parliament from the leading opposition force, the centre-left Czech Social Democratic Party (CSSD).
Parliament has approved several measures in the government's austerity package, including the controversial pension reform (due to take effect in 2013) and a package of taxation measures. The successful implementation of these measures should help to narrow the consolidated budget deficit according to EU fiscal norms in 2013.
Country Forecast Czech Republic
Czech Republic at a glance: 2012-16
OVERVIEW
Key changes from last month
Political outlook
Economic policy outlook
Economic forecast
Czech Republic--highlights: Political outlook
Czech Republic--highlights: Demographic outlook
Czech Republic--highlights: Business environment outlook
Czech Republic--highlights: Economic outlook
Czech Republic--highlights: Market opportunities
Czech Republic--highlights: Long-term outlook
Fact sheet
Political outlook: Political forces at a glance
Political outlook: Political stability
Political outlook: Political and institutional effectiveness
Problems of corruption will persist
Anti-corruption laws will be passed, but may not be effective
Political outlook: Election watch
Political outlook: Key players to watch
Vaclav Klaus
Petr Necas
Miroslav Kalousek
Karolina Peake
Political outlook: International relations
Demographic assumptions
The population will start to decline beyond the forecast period
A low fertility rate will push up the dependency ratio
Labour shortages will be a problem, undermining growth potential
An ageing population will impose an increasing burden on the state budget
Business environment outlook: Business environment rankings
Trade and investment policies will remain strong attractions
Business environment outlook: Czech Republic's business environment at a gl
Policy towards private enterprise and competition
Policy towards foreign investment
Foreign trade and exchange controls
Taxes
Financing
The labour market
Infrastructure
Business environment outlook: Macroeconomic environment
Economic recovery depends on resolution to euro zone crises
Fiscal austerity will underpin financial stability
Business environment outlook: Policy towards private enterprise and competi
Despite positive assessment, some notable problems remain
Business environment outlook: Policy towards foreign investment
The environment for foreign investors will remain welcoming
Business environment outlook: Foreign trade and exchange controls
Adoption of the euro will not occur during the forecast period
Business environment outlook: Taxes
Employers' social security contributions will remain high
Income tax code will be simplified, starting in 2014
Business environment outlook: Financing
The banking sector remains stable and is highly liquid
Business environment outlook: The labour market
The labour market will remain flexible, but labour costs will stay high
Business environment outlook: Infrastructure
Good infrastructure will continue to improve
Economic forecast: Policy trends
Economic forecast: Fiscal policy
Economic forecast: Monetary policy
Economic forecast: International assumptions
Economic forecast: Economic growth
Economic forecast: Sectoral trends
Economic forecast: Inflation
Economic forecast: Exchange rates
Economic forecast: External sector
Economic forecast: Foreign direct investment in Czech Republic
Stocks and flows
Origin and distribution
Determinants
Impact
Potential
Market opportunities: Market outlook
Purchasing power will remain high for the region
Market opportunities: Consumer expenditure
Personal technology goods will be a growth area as income rises
Market opportunities: Social indicators and living standards
Long-term outlook: The long-term outlook
Long-term growth will be above the level of the EU15
Educational reform and training will be crucial to growth prospects
Long-term outlook: Methodology for long-term forecasts
Growth projections
Definitions of variables
The independent variables include:
Summary of findings
Productivity growth
Data summary: Global outlook
Data summary: Gross domestic product, current market prices
Data summary: Gross domestic product, at constant prices
Data summary: Gross domestic product by sector of origin
Data summary: Growth and productivity
Data summary: Economic structure, income and market size
Data summary: Fiscal indicators
Data summary: Monetary indicators
Data summary: Employment, wages and prices
Data summary: Current account and terms of trade
Data summary: Foreign direct investment
Data summary: External debt
Data sources and definitions
Global data
Domestic data
Abbreviations
Guide to the business rankings model
Outline of the model
Calculating the rankings
Measurement and grading issues
Indicator scores in the business rankings model
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