Czech Republic 

Czech Republic country policy

Policy established 27 March 2001

• ILC, bank guarantee or central public guarantee (conditional)
• The country ceiling is 2000 mln euro
• Early warning signal 1500 mln euro
• - of which was used as at 2011-12-31 0 mln euro

Country class: 0

Czech Republic country facts

Atradius Dutch State Business Economic Research
Country Report last updated 11 June 2010 
Country CZECH REPUBLIC  

Political Situation

Weak Governments

Head of state
President Vaclav Klaus.

Form of government
(Outgoing) caretaker government, headed by p.m. Jan Fischer.
 
Internal Economic Situation
Open Economy Slowly Recovering From  RECESSION

General situation
In 2010 exports will pull the open Czech economy out of the recession of 2009 (real GDP-decline of 4.2%) but the recovery is still very modest. EU-markets are not buoyant and the domestic demand will probably fall again, triggering a total GDP-growth of only 0.9% this year. Domestic household and corporate spending continues to be subdued because  of strongly reduced access to bank credits. After the uptick to 6.4%  in 2008, inflation has strongly fallen below the CNB-target zone of 2% (+/- 1%): 1.1% 2009. Due to the recession the rising number of bankruptcies has burdened banks’ NPL-portfolio; however, only 15% of this is forex-denominated so that the mainly foreign owned banking sector continues to be healthy. 
 
External Economic Situation  :   Good Liquidity And Solvency Position

Main sources of foreign exchange
Industrial products (machinery and equipment: 56%), tourism, foreign investments.

Main foreign markets
EU (86%), especially Germany (32%) and Slovakia (8%).

Main expenses of foreign exchange
Machinery and transport equipment, other manufactures.

 
Balance of payments 
In 2009 imports have fallen faster than exports, resulting in a lower current account deficit (-1.2% GDP). The Czech trade surpluses compensates for the high profit remittances by foreign investors. Normally, the current account deficits are quite easily financed by investment-related/portfolio capital inflow but the credit crisis temporarily hampered fresh FDI and other capital imports in 2009. After a high mid-2008, the koruna fell victim to adverse sentiments against currencies in the region, triggering a fall in the exchange rate of  appr. 10% vs €).