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General Introduction

Development in the banking sector is naturally closely tied to the overall economic development of the Czech Republic. The Czech economy has been in a shallow, but relatively long, recession practically since the last quarter of 2011, with a GDP decline of 1.2% in 2012, which continued in the first quarter of 2013 (HDP decreased by 1.3% quarter-on-quarter). The ongoing recession thus creates a generally challenging environment for the banking sector.


General introduction

The development of the banking sector is closely tied to the development of the economy. For this reason, the period following the overcoming of the recession in 2009 – of course tied to only gradual economic recovery and marked financial problems of numerous countries – is epitomised by very difficult conditions for the financial sector. Although the Czech economy as a whole grew by 1.7% in 2011, a slowdown or stagnation of economic growth could be seen in the second half of the year (from the perspective of QOQ values), which then turned into an economic downturn in the fourth quarter of 2011. This negative development has still not had too much influence on the current YOY growth dynamic of lending and other banking transactions (month-on-month growth is slowing, however). A substantial inhibiting factor is even the very low interest rate level, which supports the supply of certain banking products and which is a reflection of both the economic situation and high competitiveness on the financial markets, especially with respect to certain products.


2010 to bring economic recovery

After the downturn of the Czech economy in 2009, which was the biggest one in the country’s modern history (4.1%), 2010 saw a surprising turnaround.  The growth of real GDP amounted to 2.3%, which substantially exceeded the expectations of a majority of economists. The growth structure, however, reflects the crisis that has passed and the specific engines behind this reversal. And even further economic development is not free of risk.  Nevertheless, there is no doubt that the Czech economy and its further development in 2011 is looking more positive than it did in the previous period. However, market turbulence, which began in August 2011, could change this view quickly.


The economy has gone through an unprecedented slump

In 2009 the Czech economy went through a slump: an unprecedented event in its modern economic history. The fall in real economic growth was 4.1%, leading to a slump in the nominal gross domestic product created for the first time since 1995. The altered dynamic of this variable exceeded 10% in comparison with 2007.