The Organisation for Economic Co operation and Development has revised downwards its forecast for Czech GDP growth in 2011 to 2.4%from 2.8% predicted in November 2010. At the same time, the OECD has raised its growth prognosis for 2012 from 3.2% to 3.5%. Its forecast for the Czech economy is more optimistic than that of both the Czech Ministry of Finance and the EU.

The OECD said that "Despite ongoing fiscal tightening real GDP growth is expected to reach 2.4% this year, driven primarily by strong foreign demand. Growth will broaden and rise further to 3.5% in 2012, as consumption picks up."

It added that "Headline inflation will spike temporarily due to scheduled indirect tax increases in 2012, but core inflation will remain low given the remaining output gap."

OECD said that "The authorities should continue with fiscal tightening to achieve medium term targets and use the upswing of the economy as an opportunity to secure the long term sustainability of pension and healthcare systems. Monetary policy should normalize gradually as the recovery takes stronger hold."

(Sourced from www.ceskapozice.cz)