(Adds analyst, background)
PRAGUE, Jan 30 (Reuters) - The Czech economy will slow
deeply in 2009 but eke out 1.4 percent growth, the Finance
Ministry said on Friday in an outlook that seemed rosier than
most analysts' expectations.
The ministry said in a quarterly forecast that growth would
slow to 1.4 percent in 2009 -- a figure flagged by Finance
Minister Miroslav Kalousek last week -- down from an earlier 3.7
percent estimate and 4 percent expected for the last year.
Czech manufacturing has suffered along with central Europe's
other export-reliant economies due to collapsing demand from a
recession-hit euro zone, and many analysts have now forecast
either near-zero growth for 2009 or even a contraction.
Under the reduced outlook, the public sector gap would jump
to 3 percent of gross domestic product this year, from the
previously predicted 1.6 percent amid the financial crisis.
The deficit would dip to 2.9 percent of GDP in 2010, when
the economy is expected to inch up 2.1 percent.
Kalousek said last week a planned 38.1 billion crown ($1.75
billion) central budget deficit would likely be almost double
and the overall public sector gap would be 3 percent of GDP if
the economy grew by about 1 percent.
"The risks of the forecast are tilted to the downside," the
ministry said in a statement. "(Growth) should be driven mainly
by household spending over the entire forecast horizon."
The European Commission forecast last week the central
European country would grow by 1.7 percent this year, but most
other agencies and analysts have been less optimistic.
"Even after a perceivable reduction of its earlier optimism,
the ministry's forecast remains greatly away from consensus on
the market," said Pavel Sobisek, chief economist with UniCredit
Bank in Prague.
"The deviation in the forecasts for this year is noticeable
in most parameters, so the outlook of the ministry looks
internally consistent but like something from a different
country or different time."
UniCredit expects the Czech economy to slip 1.2 percent this
year before picking up by 2.6 percent in 2010.
Data earlier this month showing a record drop in November
industrial output and exports signalled worse data was likely on
the way.
Some analysts say the economy entered a quarter-on-quarter
decline in the final three months of 2008, a trend likely to
continue in the first quarter.
The European Bank for Reconstruction and Development
predicted last week zero growth for 2009, and Fitch rating
agency's director for emerging Europe said the Czech economy
will contract by 1.5 percent this year.
Hungary is set for recession in 2009, while central Europe's
largest economy, Poland, is seen maintaining some growth.
The Czech Republic had been largely unhurt until now by the
global financial sector crisis that started bubbling in 2007.
Previous annual growth of around 6 percent between 2005 and
2007 had aided double-digit profit growth at banks, which kept
to plain-vanilla lending, while growing revenues for the state
helped slash government budget deficits.
Last year, the overall public sector deficit reached 1.2
percent of GDP, according to preliminary data.
The ministry forecast a current account gap of just 1.8
percent of gross domestic product this year, down from 2.3
percent expected in a previous prediction, showing the country
should maintain a relatively strong external position.
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(Reporting by Jan Lopatka and Jason Hovet; editing by Stephen
Nisbet)
