Moody’s Predicts Slowdown For Czech Economy

Moody’s predicts growth of the Czech economy will slow to two percent this year and next. The international rating agency predicted this in its annual report on the Czech Republic today. Last year, according to the Czech Statistical Office, growth slowed to 2.4 percent from 2.8 percent a year earlier. Moody’s also appreciates the government’s low debt, which has continued to fall from such low levels.

At the beginning of October, Moody’s improved the Czech Republic’s creditworthiness rating by one level to Aa3. The rating outlook changed from positive to stable. It signaled that it does not expect any further change in the rating mark in the foreseeable future.

In today’s report, Moody’s said the Aa3 rating with a stable outlook is underpinned by prudent budgetary policies, robust economic growth dynamics, and a declining government debt burden. Moody’s also pointed out an effective monetary policy and a sound banking system in the Czech Republic.

However, the Agency warned that labor shortages and rapid wage growth could affect competitiveness in the short term. Among the longer-term tasks to be addressed, the credit rating agency included a projected decline in EU funds and a high reliance on the automotive sector, which is now undergoing structural changes worldwide. The Agency considers the aging of the population to be a significant risk for budgetary sustainability, in particular, due to the slow progress of pension reform.

The European Commission has predicted that growth in the Czech economy will slow to 2.1 percent this year. Next year it expects an acceleration to 2.2 percent.