The Czech Republic’s economic growth is expected to continue at a rate of around 2.5 percent, the International Monetary Fund predicted in a press release on Thursday. Inflation is expected to go down and unemployment levels will rise. The head of the organisation also warned of the large impact that American tolls on European products would have on the Czech economy.
Last month, the IMF predicted the growth of the Czech economy would slow down from 2018’s 2.9 percent to 2.5 percent this year. It economists have since worked on a longer term forecast which was approved by the IMF’s executive board earlier this week. The forecast also expects a gradual increase in unemployment in the Czech Republic, which is currently enjoying the lowest levels of joblessness in the European Union. The IMF says that unemployment should reach 3.2 percent by 2024, an increase of just one percent compared to the current level.
Meanwhile inflation is expected to decrease to 2.3 percent by 2021. The current inflation rate lies at 2.5 percent. After that, it is expected to hover around 2 percent, which is incidentally also the target of the Czech National Bank. The press release pointed to the risks that may affect the forecast, namely a no deal Brexit, as well as continuing stagnation of the German economy.
On Wednesday, IMF Chairman Christine Lagarde used the Czech Republic as an example when warning against the dangers of a American tolls on European products.
She said that while the direct export of car components from the Czech Republic to the USA is very low, this does not mean the Czech Republic will be immune to the effects of such an event, as traditional analytical methods would suggest.
Instead, Lagarde went on, IMF research shows that the country would be the fourth most heavily impacted European economy. This due to the fact that a large volume of added value in the Czech Republic is incorporated into the export of cars from other countries to the US.