Survey of macroeconomic forecasts - November 2009

Macroeconomic forecasts' survey

The last, 28th Colloquium took place in November 2009. Results of the survey are based on forecasts of 15 domestic institutions (Cyrrus, CNB, ČSOB, Generali, Chamber of Economy, Komercni banka, Liberal Institute, MoF, Ministry of Industry and Trade, Ministry of Labour and Social Afffairs, Patria, Raiffeisen, Union of the Czech and Moravian Production Cooperatives, UniCredit, Wood & Company). To make the survey more representative, forecasts of 3 international institutions were added (European Commission, IMF, OECD).

The aim was to assess key tendencies within the horizon of years 2009 through 2012 where years 2011 and 2012 were regarded as indicative outlook. The key indicators and comparison with October MoF forecast are summed up in Tables 1 and 2.

In general it can be summed up that MoF forecasts keep to the average of other institutions' forecasts but are slightly more pessimistic, not allowing for such a fast recovery of the economy.

Table 1: Results of Survey for Years 2009 and 2010

		2009				2010
		min.	consensus	max.	MoF CR	min.	consensus	max.	MoF CR
Gross domestic product	increase in %, const.pr.	–5,3	–4,4	–4,0	–5,0	0,0	1,1	2,3	0,3
Consumption of households	increase in %, const.pr.	0,4	1,0	1,6	0,7	–1,5	–0,1	2,0	–1,3
Consumption of government	increase in %, const.pr.	1,0	2,3	4,3	2,0	–2,2	0,3	4,5	–1,0
Fixed capital formation	increase in %, const.pr.	–14,0	–7,7	–5,5	–7,8	–3,9	–1,0	2,0	–3,9
Inflation rate	per cent	0,3	1,0	1,5	0,9	1,1	1,5	2,0	1,4
GDP deflator	increase in %, const.pr.	1,3	2,9	4,2	2,7	0,2	1,3	2,8	0,2
Employment	increase in per cent	–2,5	–1,8	–1,3	–1,3	–2,7	–1,2	1,5	–1,9
Unemployment rate	average in per cent	6,5	7,1	8,3	6,5	7,5	8,4	9,8	8,4
Wage Bill (domestic concept)	increase in %, curr.pr.	-0,3	0,5	2,5	–0,3	-1,1	0,6	3,0	–1,1
Current account / GDP	per cent	–3,0	–1,8	–1,0	–1,4	–3,0	–1,3	0,4	0,4
Crude oil Brent	USD / barrel	60	67	77	61	75	79	85	79

Table 2: Results of Survey for Years 2011 and 2012

		2011				2012
		min.	consensus	max.	MoF CR	min.	consensus	max.	MoF CR
Gross domestic product	increase in %, const.pr.	1,0	2,4	3,5	2,8	2,0	3,2	4,8	3,3
Consumption of households	increase in %, const.pr.	0,2	1,5	3,0	2,3	1,5	2,6	4,0	2,5
Consumption of government	increase in %, const.pr.	–1,0	1,0	4,5	–0,6	–0,2	1,5	4,5	–0,2
Fixed capital formation	increase in %, const.pr.	–1,0	2,3	4,5	2,5	1,0	3,9	7,0	3,6
Inflation rate	per cent	1,4	2,2	3,0	1,8	1,8	2,4	3,0	2,0
GDP deflator	increase in %, const.pr.	1,3	1,9	2,3	2,3	1,5	1,8	2,3	2,0
Employment	increase in per cent	–0,5	0,5	1,5	0,0	0,4	1,2	2,0	0,9
Unemployment rate	average in per cent	7,0	8,0	9,0	8,2	5,0	6,9	7,8	7,4
Wage Bill (domestic concept)	increase in %, curr.pr.	1,1	3,5	5,7	4,5	2,5	4,3	7,5	5,3
Current account / GDP	per cent	–2,7	–0,7	1,0	0,6	–2,7	–1,1	0,5	0,8
Crude oil Brent	USD / barrel	75	85	95	93	80	97	110	93

Sources: Survey respondents, MoF calculations

Main expected tendencies of macroeconomic developments can be summed up as follows:

• For 2009 institutions expect GDP to shrink by 4.0-5.3 %. MoF estimate of the economy's decline by some 5 % ranks the ministry among the more conservative institutions. The same applies to 2010 when stagnation or recovery of the Czech economy is expected; in comparison with average of forecasts, the MoF expects a slighter recovery. Outlook for 2011 and 2012 puts the October MoF forecast close to median values of the entire survey (deviation by 0.4 p.p. in 2011 and 0.1 p.p. in 2012).
• Average rate of inflation should stick to low levels. After this year's marked disinflation, average rate of inflation should shift close to new 2 % inflation target of the CNB in the following years. The MoF forecast is in accordance with forecasts' average.
• According to consensus forecast, decline in employment and rise in rate of unemployment should be seen in this and next year. As regards outlook for 2011 and 2012, institutions allow for reverse tendencies i.e. for growth of employment and lowering of rate of unemployment. The MoF forecast for 2010-2012 is in full accordance with the consensus.
• Current forecasts allow for steep slowdown in growth of wage bill (in current prices) from 8.7 % in 2008 to some 0.5 % in this and next year, while even a decline cannot be excluded. Growth dynamics should gradually recover in the following years. MoF forecast for this and next year is conservative in comparison with average forecast.

List of indicators:Graphic presentation of the past and assumed developments of individual indicators is seen in graphs 1-18. For the sake of comparison, also consensus forecasts of two previous Colloquiums are included. Extreme forecasts of indicators (min. and max. columns in the tables) form thresholds of the highlighted area.

Graph 1: Exchange Rate CZK/EUR
Graph 2: Exchange Rate USD/EUR
Graph 3: Price of Brent Oil
Graph 4: Short-term Interest Rates
Graph 5: Long-term Interest Rates
Graph 6: Gross Domestic Product
Graph 7: Household Consumption
Graph 8: Government Consumption
Graph 9: Gross Fixed Capital Formation
Graph 10: GDP Deflator
Graph 11: Consumer Prices
Graph 12: Employment (LFS)
Graph 13: Rate of Unemployment (LFS)
Graph 14: Wage Bill (domestic concept)
Graph 15: Trade Balance
Graph 16: Balance of Services
Graph 17: Balance of Income
Graph 18: Current Account of Balance of Payments

Graph 1: CZK/EUR exchange rate
After considerable strengthening and follow-up correction, return to appreciation trend is expected

Graph 2: USD/EUR exchange rate
Weakened level of the USD should persist in the long run

Graph 3: Price of Brent oil
USD/barrel
A gradual growth of oil price to the level of USD 100 per barrel is expected in 2012

Graph 4: Short-term interest rates
% p. a.
Growth of short-term interest rates should reflect an increase in CNB rates in response to strengthening inflationary pressures

Graph 5: Long-term interest rates
% p. a.
Long-term interest rates should follow trajectory of moderate growth due to increased supply of government bonds. A considerable decrease in outlook in comparison with the situation 3 months ago

Graph 6: Gross domestic product
Real growth in %
After unexpected slump of GDP, a slight recovery should be seen in 2010 and an increase in growth dynamics thereafter

Graph 7: Household consumption
Real growth in %
After stagnation due to fiscal consolidation in 2010, a recovery of dynamics in following years

Graph 8: Government consumption
Real growth in %
Government consumption should grow only slightly

Graph 9: Gross fixed capital formation
Real growth in %
Deep slump in investment activity in this and next years

Graph 10: GDP deflator
Growth in %
Fluctuations of GDP deflator growth between 1-3 % should reflect development of terms of trade

Graph 11: Consumer prices
Average rate of inflation in %
Moderate growth of consumer prices within the tolerance band of CNB's inflation target in 2010-2012

Graph 12: Employment (LFS)
Growth in %
Considerable fall in employment in this and next year, stronger growth as late as in 2012

Graph 13: Rate of unemployment (LFS)
In %
Rate of unemployment should peak in 2010

Graph 14: Wages and salaries (domestic concept)
Nominal growth in %
Steep slowdown in this year's wage bill growth should be followed by recovery of growth dynamics

Graph 15: Trade balance
Fob-fob - BoP, CZK bn
Stable, considerably positive balance is mostly expected, with broad variation range reflecting uncertainties

Graph 16: Balance of services
CZK bn
After this year's correction, surplus of balance of services should tend to moderate growth

Graph 17: Balance of income
CZK bn
Lower incomes from foreign direct investment

Graph 18: Current account of balance of payments
% of GDP
Current account deficit of balance of payments keeping on at sustainable level, tending to balanced level