After last year’s record slump, the Czech economy will grow a little faster this year than in previous estimates, according to today’s forecast of the European Commission (EC), which improved the forecast of growth of gross domestic product (GDP) by one-tenth of a percentage point to 3.2 percent compared to the November forecast. The commission expects 5% growth for next year. The EU has worsened the outlook for economic growth in the European Union to 3.7 percent this year, while it expected 4.1 percent. Growth of 3.9 percent is expected next year.
“From the point of view of estimating the growth of the domestic economy this year, the EC’s forecast is very similar to the Ministry of Finance’s estimates, although slightly higher than the Czech National Bank’s (CNB) latest estimate or the Czech Banking Association’s (CBA) forecast published today,” said ING chief economist Jakub Seidler.
According to Seidler, the quarter-on-quarter estimate shows that the commission expects another quarter-on-quarter decline in the first quarter, which will be replaced by a solid pace of economic recovery from the third quarter. “The commission’s estimate for next year is slightly more optimistic,” he added.
Last year, the Czech economy fell by a record 5.7 percent due to restrictions associated with the pandemic, according to commission estimates. According to the first estimates of the Czech Statistical Office, last year’s decline in the Czech economy was 5.6 percent, which was the highest in the independent Czech Republic period. However, this means a better result than for the EU as a whole.
The restrictions introduced last October affected domestic demand and investment, which, according to the commission, will be reflected in decline expected for the first quarter of this year. The Czech economy should start to recover from the second quarter and reach pre-crisis levels by the end of this year.
According to the commission, the main driver of the recovery this year should be household consumption, which will reflect the labor market’s stable situation – the Czech Republic has the lowest long-term unemployment in the entire EU.
The money could also help the Czech Republic from the EU crisis recovery fund, from which the country could receive over 180 billion crowns in direct payments. According to the commission, projects financed with this money could account for up to 0.2 percent of GDP. The country could receive the first money in the second half of this year.
In the January forecast, the Ministry of Finance expects the Czech economy to grow by 3.1 percent this year. According to the ministry’s forecast, the economy should grow by 3.4 percent next year and by 2.1 percent next year. In its February forecast, the CNB expects the economy to grow by 2.2 percent and next year by 3.8 percent. The Czech Banking Association then expects economic growth of 2.6 percent this year and 4.6 percent for the year.