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Czech GDP growth slowed down in the second quarter of 2002 to 2.5 percent year-on-year, from 2.8 percent in the first quarter. It is the worst result since the third quarter of 2000. In the corresponding period of 2001, Czech GDP grew at a pace of 3.5 percent annually. Experts say the main factor behind the slowdown is weak foreign demand.

A broad public opinion survey shows that the vast majority of Czechs have accepted the government's decision to increase taxes as a means of covering the cost of the recent floods. The STEM research agency, which conducted an opinion survey on the matter, said that the majority of respondents accepted the additional tax burden as inevitable.

The Czech unemployment rate has been growing for three months and reached 9.4 percent in August. In July, unemployment stood at 9.2 percent. Analysts say the situation has worsened due to inflow of fresh school graduates to the labour market.

The Czech government has approved a package of measures to raise extra money to finance repair of damage caused by the recent devastating floods. The government hopes to gain an extra 26 billion crowns for the state budget over the next two years.

Government approves a tax reform to raise extra money to finance repairs of flood damage. GDP growth slows down while unemployment continues growing and inflation remains extremely low. In this week's edition of Economics Report, we have an analyst comment on the latest economic developments.

Insurance companies operating in the Czech Republic have revised flood damage estimates upward. The two largest insurers alone estimate the damage their clients incurred during the disastrous floods in August at almost 20 billion Czech crowns.