Czech trade balance scored the highest ever monthly deficit of CZK 24 bil. (USD 630 mil.) in December 2000, in line with our forecasts of a 22 bil. deficit. The spending spree of Czech consumers visible in December and ballooning public deficits contributed to the widening trade deficit. For year 2000 the deficit stands at CZK 127 bil. (7% of GDP), which is almost twice the 64 bil. level in 1999. While imports grew by 19% in December, export growth decelerated to 14% from 28% in November and 36% in October. For the whole year imports grew by 28% while exports by 23% only.
While the vast December deficit was expected, it did confirm growing imbalance of the Czech economy where demand outstrips supply. The great trade deficit pushes the current account deficit below the safe limit of -4% of GDP (Patria expects the current account deficit of 4.5% of GDP in 2000). It remains to be seen how the central bank will interpret the number. However, as we predict the inflation rate to remain well inside the CNB target for the whole 2001, we do not expect the central bank to raise interest rates any time soon.
(David Marek)