Healthy Czech budget a mixed economic blessing

The Czech government’s extended austerity measures have kept the country’s borrowing costs low, but they may be coming at the price of a deeper recession. Data from the Czech statistical office shows that GDP fell 0.2 in Q4 2012, the fourth consecutive quarterly decline. However, the drop was smaller than Bloomberg’s 0.3-percent estimate in a survey of 11 analysts.
“The economy faces the worst of both worlds right now: a collapse in domestic demand and insufficient foreign demand,” Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd. in London, told Bloomberg. “Its saving grace, however, is its ‘safe haven’ status in the bond markets, which is keeping yields extraordinarily low despite the significant political and economic risks.”
According to the Czech statistical office, output fell 1.7 percent in the final quarter of 2012 compared to Q4 2011. Meanwhile, the central bank cut interest rates to zero, and policymakers are still considering whether to help ease monetary conditions by weakening the Czech crown.