POLL-Czech growth seen ebbing, inflation up in 2007-2008

...

Czech economic growth is likely to slow this year and next, but a pick-up in inflation will drive interest rates higher, helping keep the crown in an upward trend, a Reuters poll showed on Thursday.

Economic growth in the European Union member country is seen ebbing to 4.9 percent in 2007 and 4.6 percent in 2008, according to the median forecasts in the survey of medium-term economic predictions among 14 economists.

Expectations of weaker demand for exports in the cooling economies of western Europe have led analysts to look for a mild slowdown from last year's estimated 6 percent expansion.

But the growth outlook is slightly better for this year and only slightly worse for next year compared with the estimates of 4.7 percent for both 2007 and 2008 in a similar October poll.

The forecast rates are also more than double the 2.1 percent and 2.2 percent predicted for euro zone in 2007 and 2008, respectively, meaning Czechs will keep closing the wealth gap on richer neighbours in the "old" EU.

"The Czech economy will slow to 4-4.5 percent this year, but it will keep growing at an above-average rate. The main driver will be household consumption which is gradually quickening," said David Navratil, economist at Ceska Sporitelna in Prague.

The median forecast saw annual inflation creeping up to 3.2 percent this year -- just above the central bank's 3 percent goal -- from December's 1.7 percent, before receding to 2.8 percent in 2008. This marked little change from October forecasts.

The central bank (CNB) was widely expected to continue a gradual policy tightening and hike its key rate to 3.0 percent in 2007 and 3.5 percent in 2008, from 2.5 percent now.

"The CNB will not be indifferent to inflation nearing the inflation target, growing demand pressures and a rise in euro zone interest rates," said Sporitelna's Navratil.

"A firming crown will do some work (in taming inflation) but to a lesser extent than it used to do in the past," he added.

The survey forecast the crown will hit new record highs of 27.2 against the euro by the end of this year and firm 26.5 by 2008, from Thursday's levels around 28.2.

(FOR POLL DATA, CLICK ON [ID:nL08270552])

((Writing by Marek Petrus; Editing by Gerrard Raven; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))

Keywords: CZECH ECONOMY/

[PRAGUE/Reuters/Finance.cz]