EBRD Downgrades 2021 Czech Growth Forecast

The European Bank for Reconstruction and Development (EBRD) has downgraded this year’s growth in the Czech economy to 3.4 percent from the previously expected four percent. Next year, however, it expects growth to accelerate to 4.6 percent. This represents an improvement over the summer forecast, which expected next year’s economic growth of 3.8 percent. This follows from today’s EBRD report.

According to the EBRD, the Czech economy should benefit from strong domestic demand as well as improved prospects for the world economy. Last year, the Czech Republic’s gross domestic product (GDP) fell by 5.8 percent due to a pandemic. The Czechia was thus one of the economies most affected by the covidu-19 pandemic in Central Europe and the Baltics, the bank writes in its report.

The bank today improved its estimate of economic growth this year in all 37 countries in which the EBRD operates to 5.5 percent from the previously expected 4.2 percent. It now expects economic growth in Central Europe and the Baltics to reach 5.2 percent this year, compared to 4.8 percent in the summer.

“However, rising energy prices and a shortage of components, chips and raw materials are already affecting countries with a high share of production in GDP, especially the Czech Republic, Slovenia, Slovakia and Hungary,” the EBRD said. “These supply chain outages are likely to have a negative impact on the region’s export performance in the short term,” she added.

The EBRD operates in a number of European countries, but also in Central Asia and North Africa. In March this year, at the request of the Czech government, the bank decided to start investing in the Czech Republic again after a thirteen-year hiatus.