RTTNews - Thursday, results of the Czech National Bank's latest financial market inflation expectations survey showed that analysts' view of the ongoing recession in the country worsened after the publication of the first quarter GDP data.

Currently, analysts' expect the Czech economy to shrink 3.4% this year, worse than the 2.4% contraction predicted in May's survey.

The estimated decline in GDP for this year deepened further, reflecting an unexpectedly strong actual decline in the domestic economy in 2009 Q1, the central bank said. The worse economic outlook had an adverse effect on nominal wage growth, especially in the non-business sector.

Going forward, the economy is expected to grow 1.4% next year, a tad less than the 1.5% predicted in May.

According to the report, analysts' are of the view that Although the economic downturn should be dampened by the carscrapping incentives in neighbouring states and the still relatively stable domestic consumption, the domestic recession may deepen further if the global economy fails to recover at least slightly.

In the one-year horizon, the inflation rate is expected to be 1.8% compared with 1.9% forecast in May. In the three-year horizon, the rate is seen at 2.5%, unchanged from May.

On Thursday, the Czech National Bank unexpectedly kept its interest rates unchanged. The Bank Board decided to leave its two-week repo rate at 1.50%. Economists had forecast a quarter point reduction in the rate to 1.25%.

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