• In the following we present an updated outlook on the Czech economy given the latest economic releases for September and October. The Czech economy has begun to recover following the sharp economic downturn due to the collapse of foreign demand for Czech exports and the plunge in investments. Economic activity dropped significantly in Q1 and Q2 this year, but we believe the worst is now over and the Czech economy should recover in the coming quarters, albeit gradually. We expect GDP to contract on average by 4.1% y/y in 2009 and grow 0.3% y/y in 2010.
    • The signs of recovery in the eurozone will have a positive impact on exports and production in the Czech Republic. Exports have already begun moving up and industrial production should improve by the end of the year. This will consequently affect investments, which are expected to gradually recover, but in H1 10 at the earliest. We expect private consumption to begin moving up but very slowly and in the second half of next year at the earliest, as the fiscal measures and continued rise in unemployment will limit consumer spending.