6th November 2015

Economic Policy: Shadow economy makes up 15 percent of Czech GDP / Central Bank to keep forex interventions.


The shadow economy makes up 15 percent of the Czech GDP, according to data released by the Czech Statistics Office, Radio Prague informed. Transactions to the tune of 614 billion crowns annually go untaxed. In addition to large-scale VAT evasion this concerns undeclared income from smaller transactions in cash for services provided. According to the Centre for Economic and Market Analyses the overall sum lost to state revenues could help create 1.5 million new jobs. Read more details (in Czech). More on that in an interview with CETA analyst Jonáš Rais on Radio Prague.

On 5 November, the Bank Board of the Czech National Bank (ČNB) decided at its policy meeting to continue the forex intervention regime and to keep the crown currency near Kč 27/€1 and interest rates at all-time lows, ČNB spokesman Marek Zeman said, Prague Post informed. ČNB governor Miroslav Singer said today the board agreed it might put off the end of the regime until a period around the end of 2016...Commenting on the second anniversary of the launch of the interventions, Singer said the economic development has been just the opposite than expected by the critics of the ČNB’s step. More details are available in an interview on Radio Zet with ING bank chief economist Jakub Seidler. Also, Czech companies, predominantly exporters, view interventions in a positive light, Radio Zet writes. Lukáš Kovanda of Roklen24 has a different view. The crown will strengthen despite ČNB's efforts, analysts say, idnes.cz wrote.

Also, the Czech Statistical Office published end October economic results for H1 2015. "Robust economic growth from the first three months of 2015 further accelerated according to the gross domestic product (GDP) in Q2. Loose fiscal and monetary policy contributing to the improvement on the labour market, i.e. a fast drop of the unemployment rate and rising incomes, but also the strengthened investment activity, favourable result of foreign trade and continuing positive expectations on the side of households and firms upturned the performance of the Czech economy more than in Q1. The GDP growth increased from +4.0 % to +4.4 % in a year-on-year comparison and the domestic economy thus expanded in total by 4.2 % for the whole half-year. The growth was non-inflationary and – with respect to the state finances and external relations development – also balanced....The GDP increased by 1.0 % compared to Q1 2015, being driven mostly by investment (+3.5 %). This rate of growth was nevertheless significantly influenced by extraordinary factors (drawing on EU funds at the end of the program period, exceptional profits of companies mostly from year 2014). Total final consumption expenditure rose by 0.6 %. Performance according to the growth of gross value added (+3.8 % year-on-year in Q2), which was based on the available data the highest in the European Union, was to the largest extend with respect to dynamics affected by manufacturing (+7,0 %)..." Read full report (in English). Click also on forecast for 2015, 2016 by the Czech Finance Ministry.

Read also data on the Czech Republic recently published by the International Monetary Fund - international reserves and foreign currency liquidity.

Members of the American Chamber of Commerce in the Czech Republic