The economic recovery next year will be weak, with the Czech Republic’s gross domestic product (GDP) growing by 1.7 percent after a 0.5 percent decline this year. The economy will not pick up significantly until 2025, when GDP will grow by 3.2 percent. Inflation is also not expected to return to the Czech National Bank’s (CNB) 2 per cent target next year, with annual consumer price growth of 3.4 per cent. Raiffeisenbank analysts said this today at a webinar on the outlook for the Czech and global economy.
Raiffeisenbank’s chief economist Helena Horská warned that the Czech economy is being held back by household consumption, recently compounded by weakening foreign demand due to economic difficulties in Germany. Horská said that real wages should start to rise next year thanks to the current high inflation, which will support household consumption, and foreign demand could also recover in the second half of the year.
“We are expecting to surpass the pre-forecast level (of GDP) in the second quarter at the earliest,” Horská noted. The Czech Republic is the only EU country where GDP has not yet returned to the 2019 level before the covid-19 pandemic.
According to Raiffeisenbank analysts, annual inflation in January will be in single digits and start with four, so the forecast is more pessimistic than the CNB. Average annual inflation is expected to be 3.4 percent, falling to 2.4 percent in 2025.
Compared to the Visegrad Group countries (Czech Republic, Slovakia, Poland, Hungary), the Czech Republic should have the second-weakest GDP growth next year after Slovakia, whose economy will grow by 1.5 percent. Raiffeisenbank analysts expect growth of 2.7 percent in Poland and 3 percent in Hungary. In contrast, inflation in the Czech Republic is expected to be the lowest among the Visegrad Group countries. Slovakia is expected to see annual price growth of 5.2 per cent, Poland 5.3 per cent and Hungary 5.8 per cent.
Horská said that in the long term, the Czech economy is stagnating and needs to find a new model of economic growth. The key, she said, would be to strengthen sectors with higher added value and final production. However, the development of these sectors is complicated by the tight labour market, where the low number of unemployed does not sufficiently motivate people to retrain for new sectors.
Source: Raiffeisenbank and CTK
