A brief review of the Czech Republic’s macroeconomic forecast for April
Domestic demand components have made a positive contribution to the Czech Republic’s economic growth, actually, favorable data were recorded in 2021, with positive growth of 3.3%. The same cannot be said for the balance of foreign trade in goods, which has slowed economic growth considerably.
The current economic scenario is not encouraging, given the geopolitical imbalances that continue to provide a significant influence on economic development and that, inescapably, will change the structure of international trade relations; in fact, the growth rate of the Czech economy will slow down by 2.1% (forecasts that take into account the entire year 2022).
Government investment and consumption, as well as that of the private sector, should give a strong boost to growth, but the gradual decline in the purchasing power of the currency does not make it easy to climb. Double digits for the average inflation rate, reaching a peak of 13% in the second quarter of this year.
According to Finance Minister Zbyněk Stanjura: “Current and especially future developments are burdened by the extreme uncertainty resulting from the war in Ukraine. For example, average inflation, which we currently expect to grow by 12.3% this year, is extremely sensitive to the development of energy prices, which are difficult to predict”.
The prices of oil, electricity and natural gas are thus contributing significantly to the inflationary flare-up. This sharp rise in consumer prices will have an impact on business costs and thus unavoidable consequences on the prices of goods and services offered.
In addition, the risk and uncertainty arising from the further development of the war in Ukraine could weaken global supply chains, caused by a possible shortage in the supply of raw materials.
Already weakened by the coronavirus outbreak, Czech public finances will record a deficit of -4.5% of GDP, due to continued Russian aggression against Ukraine and the associated humanitarian crisis. Subsidies provided to households and businesses affected by high inflation are also part of this. Thus, an increase in public debt is inevitable: from 41.9% of GDP in 2021 to 42.7% of GDP by the end of 2022.
Source: www.mfcr.cz
Sources of images: Pixabay.com; Storyset.com
