The USD 217 billion economy is suffering from weakening domestic demand. Household spending fell 3.5 %, the first decline since 1998, and business spending dropped 1.6 % in 2012 due to government austerity measures and the euro area’s debt crisis.

Foreign trade showed positive contribution to the GDP in 2012 as exports grew faster than imports. Exports were up by 4.2 %, the only really bright spot in the Czech economy, and a testament to continued demand for Czech industrial production despite the slump in the eurozone.  

The central bank cut borrowing costs three times in 2012 to effectively zero and it is navigating uncharted territory. The bank’s forecast shows further policy easing will be probably needed this year.