By Jana Mlcochova
PRAGUE Jan 31 Czech finance ministry slashed
its growth outlook for this year to almost zero on Thursday
after poor economic data showed the year-and-half old economic
The ministry now expects the economy to eke out just 0.1
percent growth in 2013, down from 0.7 percent seen in its
"The Czech economy was probably going through a shallow
recession in 2012. It could emerge from (the recession) in the
beginning of this year although a revival of economic activity
should be very gradual," the ministry said.
A series of tax hikes and budget cuts by the centre-right
administration of Petr Necas hit household consumption while
falling demand for Czech industrial products from the euro zone
prompted companies to lay off people, curb wage increases, and
Falling industrial output, the main driver of Czech growth,
and purchasing managers indexes on the manufacturing sector have
shown companies suffered from falling new orders.
Contracting retail sales, decelerating inflation and rising
bank deposits have underscored defensive consumers.
The Czech economy has not grown since the middle of 2011
while the central bank cut borrowing costs to zero to prop up
demand and said it would weaken the crown if it needs to ease
policy further, to avert expectations for price falls and push
people to spend.
The ministry expects household demand to contract by 0.7
percent this year, deeper than the 0.5 percent fall seen in
October, and it sees the contribution of net exports to growth
at 0.7 percentage points, down from 1.0 points seen in the
"The forecast seems slightly pessimistic... however, I agree
with the view that the state budget will be tight this year and
demands caution," said Pavel Sobisek, chief economist at
Regional peer Poland saw its growth fall to its weakest in
three years in 2012 and is still slowing, adding to signs that
one of Europe's most resilient economies risks dipping into
However, latest data from Germany, the Czech Republic's main
trading partner, including the business climate index Ifo and
PMI showed business morale and activity has improved.
Czech Central Bank Deputy Governor Vladimir Tomsik told
Reuters in an interview earlier this week the outlook for growth
abroad has not worsened since the bank's November forecast,
which was a good signal.