A faster than expected recovery awaits the European economy, with Czechia growing by almost 3.5 percent

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The European Union’s economy will grow faster than expected this year and next, mainly due to the more rapid easing of anti-pandemic restrictions. The European Commission stated this in its spring macroeconomic forecast, increasing its GDP growth outlook for 2021 to 4.2 percent. The Czech economy will grow by 3.4 percent, while the February forecast predicted an increase of just 3.2 percent.

On the contrary, the Commission expects significantly slower growth for Czechia’s economy next year. Although it originally predicted a 5 percent increase, the new forecast sees growth of 4.4 percent. Last year, the Czech economy fell by a record 5.6 percent due to coronavirus restrictions, according to the latest EC data.

“Czechia has been hit hard by the second wave of the pandemic,” states the assessment of the Czech economy.

According to the European Commission, the recovery should be ensured primarily through domestic and foreign demand, which will start to grow again in Q2, thanks to the gradual easing of restrictions. Ongoing government support programs will also play a role in the recovery. However, according to the EC, together with the reduction of the income tax, these programs will also contribute to the rapid growth of the public debt-to-GDP ratio.

The Commission expects inflation in the Czech Republic to be above the EU average this year, as well as in the next two years. It predicts average inflation of 2.4 percent for 2021 and 2.2 percent for 2022. In terms of  unemployment, Czechia will perform better than the EU average, with the country’s unemployment rate rising to 3.8 percent this year — almost four percentage points below the EU average.

The Commission’s previous estimate in February saw European growth of 3.7 percent this year and 3.9 percent next year. According to the EC, the reason behind its more optimistic forecast is primarily the faster rate of vaccination, which is allowing many countries to return to normal more quickly than expected. In 2022, the EU economy, which experienced a record slump in 2020 due to the pandemic, is expected to grow by 4.4 percent.

The European Commission has also improved its estimates for eurozone countries, where it expects growth of 4.3 percent in 2021 and 4.4 percent in 2022. In the winter, it had predicted GDP growth of 3.8 percent for both years.

Title image: People wait in line in front of a shop in Prague, Czech Republic, Monday, May 10, 2021.  (AP Photo/Petr David Josek)

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