Czech economy may have dropped up to 14% in Q2

Confidence in the economy rises despite challenges

editor: REMIX NEWS
author: Czech News Agency

According to economic experts, the Czech economy probably experienced its highest decline ever in the second quarter due to the effects of the coronavirus epidemic and restrictive measures, however, their estimates of the severity of the economic fall vary substantially.

Year-on-year, they predict a decline in GDP of between 9.7 and up to 18 percent.

Quarter-on-quarter, the decline could reach 7.4 to 14 percent. However, the economy currently shows signs of recovery, analysts say.

“It is clear that due to the coronavirus pandemic and the restrictive measures, the year-on-year and quarter-on-quarter economic downturn will be unprecedented and historically the highest,” said ING chief economist Jakub Seidler.

He noted that other countries affected by the coronavirus pandemic expect a similar decline.

“According to estimates, the German economy could fall by nine percent quarter-on-quarter, and the year-on-year decline will exceed ten percent. In France, a quarter-on-quarter decline of 15 percent is expected, while year-on-year, the economy could shrink by a fifth” he said.

According to Deloitte’s chief economist David Marek, the decline in GDP of the Czech Republic is caused mainly by financial losses in the industry, trade, transport, hospitality, and accommodation sectors.

“In the second quarter, demand will have dropped for household spending, as well as the volume of investments and foreign trade. Government spending, on the other hand, increased. Still, supply declined mainly for industry and part of the services sector most affected by the restrictive measures,” predicted analyst in the Akcenta company Miroslav Novák.

Raiffeisenbank’s chief economist Helena Horská pointed out that the economy registered depreciation of 180 billion korunas (€6.85 billion) in the second quarter.

“Revenue losses could reach up to 305 billion korunas (€11.61 billion). The state has so far poured around 120 billion korunas (€4.57 billion) into the economy,” she continued, adding that according to leading indicators, the economy has already started to recover in the third quarter.

“The fact that the year-on-year decline in GDP will deepen in the second quarter is obvious, it’s just a matter of whether it will be double-digit decrease or not. Monthly data show optimism, though. The recovery of economic activity was faster than expected in May and June. Confidence in the Czech economy is also increasing. The decline in GDP in the second quarter could be less than ten percent,” said Martin Gürtler, an economist at Komerční banka.

In the first quarter, the Czech economy dropped by two percent year-on-year. Compared to the previous quarter, GDP was lower by 3.4 percent, representing the biggest decline in the Czech economy since the beginning of 2010.

Title image: A broker watches her screens under the curve of the German stock index DAX in Frankfurt, Germany, Tuesday, March 17, 2020, the day after German authorities spoke out more restrictions to avoid the spread out of the coronavirus. Only for most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. (AP Photo/Michael Probst)


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