Austerity Measures hurting Czechs as domestic demands weaken

The Czech economic recession probably stretched to the longest on record in the fourth quarter as the government extended its austerity program and the euro-area crisis curbed demand for exports.

Gross domestic product shrank 0.3 percent from the third quarter of 2012, marking the fourth consecutive decline, according to the median estimate in a Bloomberg survey of 11 analysts. The Czech Statistics Office will publish preliminary GDP data at 9 a.m. in Prague today. Output declined 1.7 percent from the final quarter of 2011, according to the survey.

The $217 billion economy is suffering from weakening domestic demand, with households and businesses spending less due to government austerity measures and the euro area’s debt crisis. After cutting borrowing costs three times last year to effectively zero, the central bank is navigating an uncharted territory as policy makers debate whether to further ease monetary conditions by weakening the currency.

The koruna strengthened after the central bank’s policy meeting on Feb. 6, gaining 1.8 percent to the euro, its best weekly rally in 14 months. Since then it has weakened, falling 0.6 percent against the euro this week to trade at 25.394 late yesterday.


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