William Malcolm

EC Cuts Forecast For Czech Economic Growth In 2021

The European Commission has cut its estimate for this year’s growth in the Czech economy to three percent, expecting 3.9 percent. Next year, it expects growth of 4.4 percent. On the contrary, this year’s EU economic growth outlook has improved to five percent. For next year, however, the estimate was reduced to 4.3 percent due to fears of rising prices.

The EC has reduced the estimate of this year’s growth of the Czech economy to three percent
The Czech economy will grow again this year after last year’s record slump, but the pace of recovery will be slower than expected. In its economic forecastThis was stated today by the European Commission (EC), according to which the gross domestic product (GDP) of the Czech Republic will increase by three percent this year. In the previous forecast, the commission expected growth of 3.9 percent in the summer. For next year, the EC has only slightly adjusted the forecast. Instead of the original 4.5 percent, it now expects growth one tenth of a point weaker.

According to the commission, the continuing shortage of some raw materials and important materials may have an impact on the deterioration of the estimate. This may affect the production and exports of the automotive industry, which is of key importance to the Czech economy.

“The recovery of the world economy in the second half of this year was still significantly affected by disrupted customer relations and shortages of materials. Although these problems subside slightly, they are likely to persist in the first half of next year. companies, as well as household consumption, “said the chief economist of the Czech Banking Association Jakub Seidler.

According to Radomír Jáč, chief economist of Generali Investments CEE, it will be important for the next year’s economic performance how much it will be possible to solve the problems in the supply of necessary components in industry and especially in the motor vehicle industry. “This applies both to the Czech economy and to a number of other European countries,” he said.

According to the European Commission, the growth of the Czech economy will be driven primarily by household consumption, which will remain high thanks to the continuing stable situation on the labor market. Unemployment in the Czech Republic according to the forecastthe commission will remain one of the lowest in the EU at 2.7 percent this year. In contrast, inflation will exceed the EU average and, according to the commission, will reach 3.3 percent this year. Especially due to the expected further rise in energy prices at the beginning of next year, the EC expects inflation in the Czech Republic to rise slightly next year as well, reaching 3.4 percent. Then prices should start to fall.

In its new forecast this week, the Czech Ministry of Finance worsened its estimate of economic development for this year and next. It expects GDP growth of 2.5 percent this year and 4.1 percent next year. In the new forecast from last week, the Czech National Bank (CNB) also worsened the estimate of economic development for this year and next. It expects growth of 1.9 percent this year and 3.5 percent next year.

The EC has raised its estimate for this year’s growth in the EU economy to five percent
The growth of the European Union’s economy will be faster than originally expected this year, mainly due to the successful recovery from the coronavirus crisis. In its autumn macroeconomic forecastThis was stated today by the European Commission (EC), which thus improved the estimate of the growth of gross domestic product (GDP) of the EU countries to five percent. It expected growth of 4.8 percent in the summer.

However, the EU executive sees risks in the scarcity of some resources and in rapidly rising prices, especially energy. For this reason too, it expects economic growth of 4.3 percent next year, which is two tenths of a point less than expected in the previous forecast. The commission estimates a similar development as in the 27-year-old this year and next for 19 euro area countries. There it expects growth to the same extent.

Especially thanks to the unprecedented rapid growth of this year’s second quarter, the economy is already reaching pre-crisis levels. According to the Commission, the high rate of vaccination against Covid-19 and the associated lifting of restrictions restricting economic activity contributed to this favorable development.

“However, we must not succumb to a false sense of satisfaction. There is still uncertainty about the virus and there are risks that we have to deal with,” EC Economy Vice-President Valdis Dombrovskis said today.

In addition to the accelerating spread of the disease in a number of countries, the Commission considers the shortage of certain raw materials and rising prices, which is particularly evident in energy, to be risk factors for the EU economy. According to today’s EC estimate, inflation, which has picked up its highest rate in more than a decade in recent months, will reach 2.6 percent in the 27 years and 2.4 percent in the euro area. It is expected to slow slightly next year, to 2.5 percent in the EU and 2.2 percent in the euro-paying countries.

“This view is shared by a large number of member states, based on realistic assumptions. But it is only a prediction, we cannot take it for granted,” EU Commissioner Paolo Gentiloni said today when asked what the commission is basing on when inflation slows. The Commission acknowledges that inflation may remain high for longer if resource shortages, such as natural gas, continue.

According to the commission, the level of economic growth will vary significantly between member states this year due to the different impact of anti-pandemic measures or the lack of raw materials. The economy of Ireland will grow the most (14.6 percent), followed by Estonia (9.0 percent) and Croatia (8.1 percent). On the other hand, countries with below-average growth include Slovakia (3.8 percent), the Czech Republic (3.0 percent) and Germany (2.7 percent).