Brussels – The Czech economy will stagnate in the first quarter of this year and will show growth of 0.1 percent for the whole year. This will be significantly below the expected average for the entire European Union. This is taken into account by the European Commission's macroeconomic forecast, which in the case of the Czech Republic has not changed its earlier estimates of this year's minimal growth in gross domestic product (GDP).
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The Czech economy could return to faster growth next year, when the European Commission expects GDP growth of 1.9 percent. Last year, the Czech economy grew by 2.5 percent.
Contrary to the previous forecast, the commission reduced the estimate of this year's inflation development by a tenth of a percentage point, which it says will reach 9.3 percent in the Czech Republic. It would thus be the fifth highest in the entire EU after Hungary, Poland, Slovakia and Romania. Next year, inflation could approach pre-crisis values and fall to 3.5 percent. The average value of inflation last year reached a record 14.8 percent.
According to the commission, one of the causes of the slow growth of the Czech economy will be this year's stagnation in household consumption, which will be caused by a decrease in the real income of the population. Next year, however, it should once again become the main engine of growth.
According to the commission, economic activity in the Czech Republic this year will be mainly driven by investment growth. Although it will slow down due to the deteriorating financial situation of companies, it will be able to benefit, for example, from the extraordinary EU recovery fund, which should pump tens of billions of crowns into the Czech economy.
The EU economy will avoid recession, this year it will grow by 0, 8 percent
In the first part of this year, despite the continuing effects of Russian aggression in Ukraine, the European economy will avoid the recession announced so far, and this year's economic growth will be higher than originally estimated. The European Commission stated this in its winter macroeconomic forecast. According to the commission, the gross domestic product of the countries of the European Union will increase by 0.8 percent this year, which is half a percentage point more than it predicted in the fall.
At the same time, the EU executive lowered the estimate of inflation in the twenty-seven member countries, which, according to it, will slow down to 6.4 percent this year. The previous forecast counted on seven percent. Inflation should not approach pre-crisis values until next year, when, according to the commission's estimate, it will fall to 2.8 percent. Last year it reached 9.2 percent.
For the twenty countries of the eurozone, the commission estimates this year's economic growth at 0.9 percent, while earlier it counted on growth of 0.3 percent. The GDP growth forecast for next year remains unchanged for both the EU (1.6 percent) and the eurozone (1.5 percent).
According to the commission's economists, sufficient gas reserves and related easing pressure on energy price growth. The fact that the EU countries were able to partially get rid of their dependence on Russian energy is also important. The stable situation on the labor market also helps, where unemployment remained at a record low level of 6.1 percent until the end of last year.
“We entered 2023 in a better situation than expected. Risks of recession and shortages gas has subsided and unemployment remains at a record low level. However, Europeans still face a challenging period,” warned the European Commissioner for the Economy, Paolo Gentiloni, today against excessive optimism.
The Commission emphasizes that uncertainty remains especially in view of the ongoing war in Ukraine high and will also be related to the degree of expected recovery of the Chinese economy after the lifting of strict anti-pandemic restrictions. This can then increase inflationary pressures.
