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World economic growth slowed slightly in 2012 compared to the previous year, achieving growth of 3.2% (based on the WEO IMF) after the 4% growth in 2011. The outlook for this year predicts similar development approaching 3.3%. More importantly, however, the differences between the main sections of the world economy are constantly growing. In the case of the United States (2012 growth increased to 2.2%) the main question is whether the early economic recovery (which is connected to the improved situation in American households) will be affected by the upcoming fiscal consolidation and pulling back from the extremely relaxed FED monetary policy. In the case of China and other emerging economies that had been growing quickly, the main variable is the extent of the slowdown in their growth. Emerging economies as a whole exhibited slowed growth of 5.1% in 2012 from the previous 6.4%.

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Global economic growth slowed to 3.9% in 2011 from 5.3% in 2010, again with marked differences among the various economies. The growth dynamic nevertheless slowed even in the developing economies of Asia and Latin America.

Although real Czech GDP in 2011 grew by 1.7%, this was in particular due to development in the first two quarters of the year when GDP still grew QOQ by 0.5% and in the second quarter by 0.3%. Stagnation was registered in the third quarter, however; in the fourth quarter, GDP fell by 0.2%. A decline of 0.8% was registered in this first quarter of 2012 as well. The CBA’s latest macroeconomic forecast for July, which already takes into account this development, expects the economy to drop by 0.06% in 2012, with a slight 1% rise in 2013.

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In 2010, global economic growth was again positive (+5.1%), but with marked regional differences. The relatively slower growth of the American economy and European economies (even though even here there were great internal differences) was compensated by fast growth in Asia and Latin America. The Czech economy in 2010 benefited in particular from its close ties to the German economy, which managed to show very positive performance (+3.5%).

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In 2009 the global economy suffered the worst downturn (a fall of 0.6%) since the Great Depression of the 1930s. Although in the Czech Republic the source of the crisis was not of “domestic origin” and did not take the form of the financial crisis that struck other developed economies – here it was a matter of the secondary consequences of the crisis (due to ties with the real economy in countries affected by the financial crisis) – the consequences have been no less grave for that. There was a very marked economic downturn in the first (and in part the second) quarter of 2009, but since the second half of 2009 we can see a very slow and fragile recovery. In 2009 as a whole there was an economic downturn of 4%. Most analysts agree that output for 2010 will grow in the range 1.5-2%. According to CSO data Czech GDP in the first quarter of 2010 was up 1.1% year on year, and according to preliminary estimates the figure for the second quarter is 2.2%. However, it must be said that some of the key factors in the recovery are very fragile and risks remain (e.g. in the form of further fiscal imbalance in the eurozone, or substantial fiscal restrictions and a premature exit strategy from the measures to combat the crisis in key trading partners; or new uncoordinated and disproportionate banking regulation requirements, etc.).

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Over the last few years, the Czech economy has shown very solid economic growth. This favourable period, however, was not used to improve the country’s fiscal state; therefore, now, during the economic slowdown, the state budget has less potential to improve the balance. Public debt, which at the end of the first quarter of 2009 exceeded CZK 1 trillion (to be more exact, CZK 1000.15 billion), will thus represent a significant expenditure item in terms of the debt service, let alone in terms of paying off the principle. A more active focus on implementing a more restrictive fiscal expenditure policy is showing to be an absolute necessity. Although the development of GDP is still not as dramatic as in some European economies, the fall in actual GDP by 3.4% for the first quarter of 2009 is a more than clear indication of a decline.

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