Prague - Last week brought some good news regarding the shape of the global economy.
According to new economic data, the US economy has grown 2.5 percent in the third quarter, boosted by higher consumer spending.
Also, European leaders reached a last-minute deal on the euro crisis, spurring hopes that the euro-zone will be able to prevent the imminent Greek contagion.
And stocks rallied. In October, the US S&P 500 has recorded its largest one month increase since 1974.
However, there is still much to be done regarding the euro-zone crisis, and Europe's growth prospects for 2012 are very bleak.
The Czech Republic seems to confirm these worries. In a weekly talk-show broadcast on Sunday by public-service Czech Television, Finance Minister Miroslav Kalousek admitted that he expects the Czech economy to grow no more than 1 percent in 2012.
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In July 2011, the ministry had estimated the growth to 2.5 percent and had based its draft 2012 budget on this figure. If the Czech economy grows only 1 percent in 2012, the budget deficit will increase by CZK 22bil (EUR 0.9bil).
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Kalousek explained that the estimate had to be downwardly revised because the recent negative change of economic indicators in Germany, the Czech Republic's neighbor and most important trade partner.
Earlier this month, German economists lowered their 2012 GDP growth forecast to just 0.8 percent.
Back to 2008?
A 3-year old scenario seems to be repeating in the Czech Republic. In 2008, Kalousek prepared a draft 2009 budget, expecting a 5 percent GDP growth. Nonetheless, even before the draft could be passed by the Czech parliament, the ministry cut the growth estimate to 3.7 percent. Kalousek refused to modify the draft.
Eventually, the Czech economy contracted by nearly 5 percent in 2009, and the budget deficit reached a record CZK 192bil (EUR 7.7bil).
This year, Kalousek has prepared a budget draft for "an expected growth" of 2.5 percent and a budget deficit of CZK 105bil (EUR 4.2bil).
Pavel Mertlík, an economic expert for Raiffeisenbank and former Czech finance minister, expects the Czech economy to grow by 0.3 percent in 2012.
"The euro-zone will grow only 0.2 percent next year, and the Czech economic growth will be kept down by fiscal cuts and the increased VAT. Domestic industrial orders are decreasing sharply, foreign orders are decelerating as well, the construction sector is in a free fall, and the stagnating consumption of the population is weighing on other sectors as well," Mertlík said about the reasons for his pessimistic vision.
Another problem is the unemployment.
Currently there are nearly 500,000 unemployed in the 10.5 million Czech Republic. According to the minister, next year the number of jobless will decrease by at least 30,000.
However, Mertlík expects the rate to stay the same.
