WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

The Czech economy is entering a recession whose depth and duration will partly depend on the euro area developments. The recession may be moderated by the Czech currency’s relative weakness. While the financial conditions and the monetary policy are essentially conducive to growth, the untimely – and actually unnecessary – fiscal consolidation implemented is the primary determinant of the overall poor performance of the real economy. The prospects for 2013 and 2014 may look better because by that time the fiscal consolidation will be either successfully completed – or discontinued.