Czech to cut 2012 GDP finance ministry forecast

PRAGUE: Czech economic growth may be slower next year than the 2.5 percent predicted in the latest Finance Ministry forecast issued in April, due to the recent slowdown in key western markets and deepening debt crisis in the euro zone, Finance Minister Miroslav Kalousek said on Sunday.

Kalousek refused to say by how much he expected the economy to slow down next year, due to the unpredictable environment.

He said the government would submit next year's budget to Parliament based on the original prediction, and the figures could be revised later, to ensure the central government budget deficit would not exceed the original target of 105 billion crowns ($6,22 billion).

"The April forecast was 2.5 (percent), and with high probability it will be less, and at this moment nobody can say by how much," Kalousek said in a TV talk show.

"If there is a steep slow-down especially in euro zone countries, than we can expect with a 99 percent probability that it will also translate into our (GDP) figure," he said.

The Finance Ministry is due to publish its new semi-annual macroeconomic forecasts at the end of September.

In early August, the Czech central bank (CNB) cut its GDP forecast for next year to 2.2 percent from 2.8 percent.

The cabinet must submit the budget proposal to lawmakers by the end of September.

"We will clearly say that (the current budget proposal) is based on April prediction that means that we cannot rely on this indicator. And that we expect that in case of a slow-down we will make further measures. Clearly, this is one of the options," he said.

The three-party government coalition won last year's general election on promises of fiscal austerity. In the outline of the 2012 budget approved in July, it aims to reduce the overall fiscal gap to 3.5 percent of gross domestic product from around 4.2 percent expected this year.

Copyright Reuters, 2011