The Economy of Czechia

Czechia is an advanced country that ranks among the countries with the most developed economy in the world. Czechia is a member of the OECD (Organisation for Economic Co-operation and Development). It is based on industry and services (60%), agriculture and other primary production.

The main industries are automotive manufacturing, electronics, mechanical engineering, high technology , steel manufacturing, transportation equipment, chemical manufacturing and pharmaceuticals.

The main agricultural products are cereals, vegetable oils and hops. Key mineral resources mined in Czechia include black and brown cleansing, kaolin, building materials and uranium. The most important product of the Czech economy is Škoda Auto.

Czechia has the most self-employment per population in Europe. The average wage as of 2021 is around CZK 37,800 (EUR 1,540). It is among the countries with the lowest proportion of people at risk of income poverty in the EU. Unemployment and state indebtedness in Czechia remain among the lowest in Europe.

In the first quarter of 2015, the Czech economy grew the fastest among the EU states. The Czech economy grew by 3.3% in 2021 and the following year. Despite the fact that the economic situation in Czechia is slowly improving and companies in the industry are starting to emerge from the worst, so a return to the pre-pandemic situation probably cannot be expected even in 2022.

According to the Deloitte forecast we can expect GDP growth of 4%, which would mean reaching the pre-pandemic situation for the Czech economy at the end of 2022 at the earliest. GDP will be supported in particular by higher household consumption (3.1%) and an improvement in the external balance (1.6%). Employment is expected to increase gradually in 2022, with the unemployment rate falling to 3%. In the context of growth in foreign and domestic demand and a gradual reduction in commodity and energy prices, the surplus of the balance of goods and services should grow to CZK 281 billion in 2022 and the current account deficit should decrease to 0.3% of GDP.

In early 2022, inflation exceeded 8% and is gradually increasing. In the context of inflation, the ČNB (Czech National Bank) continues to raise interest rates. Stabilisation is not due until mid-2022. Monetary policy easing could then come from the ČNB.

This post was written by Veronika Pluháčková who was a research intern at Irish Mortgage Brokers in May of 2022.

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