Proxying external developments after Slovakia’s entry to the euro area

In connection with Slovakia’s entry into the euro area, a new definition of the effective external indicators is used in the assumptions of the forecast regarding the external environment starting with the II/2009 Inflation Report. The base for the calculation of the effective GDP, CPI and PPI indicators has been extended to include Slovakia, Slovenia and Cyprus. Luxembourg and Malta are not taken into account in the calculation of the effective indicators, as they are not monitored in the Consensus Forecasts surveys and their impact on the indicators is negligible given their weights in Czech foreign trade.

Tab. 1 (Box) Changes in weights for the construction of effective indicators - eight largest trade partners
(in per cent)

Country Initial weight New weight
 Germany 61 47
 Slovakia 0 14
 France 7 8
 Austria 10 7
 Italy 8 7
 The Netherlands 5 6
 Belgium 4 4
 Spain 3 3

The new weighting scheme (Table 1 Box) is based on the average volume of Czech exports in 2008 (the previous weighting scheme used foreign trade turnover in 2005). Economic growth in Slovakia thus has a 14% weight in the current depiction of the external environment. Germany’s weight has decreased to 47%. The forecasts for inflation (CPI, PPI) and real GDP growth for the individual countries continue to be taken from the monthly Consensus Forecasts (CF) published by Consensus Economics Inc.


A comparison of the previous and new indicators of inflation and GDP growth (including the current forecast) is shown in Chart 1 Box and Chart 2 Box. The new effective indicators of CPI and GDP growth are higher on average than the previously used indicator. The effective indicator of PPI growth is virtually unchanged since its CF forecast is available only for Germany, Italy and the euro area as a whole, hence the effective indicators cannot take into account all the countries in the weighting scheme.