ČNB keeps its GDP growth forecast for this year at 1.4%

Prague, Feb 4 (CTK) - The Czech National Bank (CNB) in its new forecast has kept its estimate for GDP growth at 1.4 percent for this year and moderately worsened its estimate for next year - to 2.1 percent, the central bank's governor Zdenek Tuma said at a press conference yesterday.

Czech economy contracted by 3.9 percent last year, according to the CNB's estimates. In November, the CNB reckoned with a 4.4 percent GDP fall for that year.

The Finance Ministry's estimates put Czech GDP growth at 1.3 percent for this year and at 2.6 percent for 2011.

The International Monetary Fund (IMF) expects a 1.5 percent growth in Czech GDP for this year. Analysts estimate a growth between one and 2 percent.

"Our point of view of the economy has not changed and there were no dramatic alterations," Tuma said.

Tuma believes a more permanent economic growth will come only next year in connection with a more significant revival abroad.

The CNB expects the economy first to grow by 2 percent in the first quarter and then the growth to be slowing down gradually.

The forecast counts on stability of market interest rates in the first half of this year and then on their gradual growth, Tuma said.

"Interest rates should stay at the current level in the coming months. They will rather head up in the second half of the year," Tuma added.

Total inflation will be growing in the first half of the year, and in the second half will increase to more than 2 percent due to tax changes.

In the first quarter of 2011, inflation should stand at 2 percent, and in the second quarter at 2.1 percent.

"Household consumption will remain subdued and we therefore do not see inflation as an important risk," Tuma noted.

The main risks which could put the new estimated development in danger are balanced. Development of nominal wages could act for or against the price growth, he added.

The Bank Board yesterday also discussed the development of public finances.

"Fiscal development is hard to predict, we have discussed the structural part of the deficit," Tuma said, adding that the deficit is growing and so significant changes are needed in the structure on the side of spending as well as revenues.

The CNB expects average rate of the Czech crown for this year at Kc25.50/EUR and for next year at Kc25.20/EUR. The crown is currently traded around Kc26.0/EUR.