The Czech Economy is in “Mild Recession”, Says Ministry of Finance

The Czech economy is set to grow by 2.4 percent this year, although it is “currently going through a mild recession,” Finance Minister Zbyněk Stanjura (ODS, ECR) said on Wednesday.

According to the ministry’s November macroeconomic forecast, the country’s gross domestic product (GDP) could increase by 2.4 percent in 2022, after growing by 4.2 percent year-on-year in the first half of the year.

The estimate is 0.2 percent higher when compared to the ministry’s August projection. Growth should be driven by fixed capital investment and increased inventory accumulation, the ministry said.

However, the forecast estimates that the economy will go through a slight recession in the second half of the year and early next year. In 2023, it will contract by 0.2 percent, the ministry has predicted.

“GDP could be more or less stagnant in 2023. Households will continue to face the impact of high inflation next year, so their real consumption should fall slightly. Government consumption and gross fixed capital formation will continue to be pro-growth, but weaker year-on-year inventory accumulation will slow the economy noticeably,” the ministry said.

Czech Finance Minister Zbynek Stanjura described ongoing high inflation driven by unprecedentedly high energy prices as the “main economic problem today.”

In the Czech Republic, inflation figures for October are yet to be published, but the 18 percent year-on-year rate for September was already worrying.

According to the ministry, annual inflation is expected to fall significantly in the fourth quarter thanks to the energy-saving package, and the average inflation rate should reach 15.0 percent this year. In 2023, the average inflation rate could slow to 9.5 percent.

Last year, the Czech GDP grew by 3.3 percent year on year, according to the country’s Statistical Office.