Prague - The Czech Finance Ministry revised its economic growth outlook for this year up to 2.7 percent in its latest forecast from 1.7 percent in April forecast thanks to better-than-expected development in the first quarter, the ministry said today.
"Such a significant change - by 1 percentage point - was almost solely caused by a better-than-expected development in the first quarter," the ministry said in a press release.
Gross domestic product (GDP) increased by 2.9 percent year-on-year and by 0.8 percent month-on-month in the first quarter of 2014.
The growth of the estimate is unusually sharp, but it entirely corresponds to the shift in market opinions, UniCredit Bank analyst Pavel Sobisek said.
However, the Finance Ministry and analysts differ in the opinion about the economic development next year, namely whether the growth will accelerate or slow down, Sobisek said.
"The expectation of the first possibility still predominates on the market, but the number of advocates of the second possibility is increasing. But it is all right that the Finance Ministry belongs to the conservative wing," Sobisek added.
For 2015, the ministry expects the economy to expand by 2.5 percent in its latest forecast compared with a 2 percent growth in the April forecast.
The economic growth for 2016 and 2017 is also projected at 2.5 percent.
Inflation should be very low this year despite forex interventions by the Czech National Bank (CNB) and the weakening of the crown, the ministry said.
Average inflation could be only 0.6 percent this year, but in 2015 it should accelerate to 1.7 percent, a level still below the CNB's 2 percent inflation target, according to the ministry's forecast.
The Finance Ministry expects the public finance deficit to reach 1.5 percent of GDP in 2014, the same as last year.
European Unions rules require a deficit below 3 percent of GDP.
"At the same time, the government sector debt should decrease by 2 percentage points to 44 percent of GDP," the ministry said.
The CNB's forecast from May expects the economy to expand by 2.6 percent this year and by 3.3 percent next year. The CNB will release a new forecast on Thursday.
Finance Ministry's estimates (estimates from April forecast in parentheses):
|2013||2014 estimate||2015 estimate|
|GDP||-0.9 %||2.7 % (1.7 %)||2.5 % (2 %)|
|Average inflation||1.4 %||0.6 % (1 %)||1.7 % (2.3 %)|
|Unemployment||7 %||6.4 % (6.8 %)||6.1 % (6.6 %)|
Source: Finance Ministry