“Compared to neighboring countries and the rest of Europe, the recovery of consumption after a series of crises is the slowest in the Czech Republic, which largely explains the lagging behind the entire Czech economy,” Cyrrus economist Vít Hradil told Práv, referring to the covid pandemic and the effects of Russian aggression in Ukraine . The preliminary estimate of the development of the gross domestic product for the third quarter of this year is also heading into the negative.
Czechs will probably not reach their pre-pandemic level of purchasing power before 2025.
However, according to Hradilo, better consumer demand is only a matter of time. “Wage growth started to outpace inflation quarter-on-quarter already in the second quarter and will most likely continue. Czechs will thus become rich again, although they will probably not reach the pre-pandemic level of purchasing power before 2025,” he estimated.
He also emphasized that, in addition to income growth, it will also be necessary to restore the confidence of the population in a brighter economic tomorrow. “This should happen by the beginning of next year at the latest, when rampant inflation is out of their minds. Retail sales should thus return to growth next year, growth of around four percent seems realistic,” said Hradil.
Czechs deal with the expensive simply. They just won’t open their wallets
Economist Markéta Šichtařová is somewhat more skeptical. “Retail trade in the sum of 2023 will drop by five percent. It should grow by three percent next year,” she said.
We will survive the winter in an old coat
Economists agree that this year’s Christmas will be more modest. But Petr Dufek from Creditas Bank believes that the situation will gradually improve. “It probably won’t be a return of the shopping boom, but in fact there won’t be much left to fall. A very low comparative basis will work, in addition to a drop in inflation, and suddenly the retail figures will look a bit better after all,” he pointed out regarding the near-term outlook.
Although retail sales will show a strong real decline this year, according to Dufka, this does not mean that merchants will be worse off than last year in terms of financial results.
Filip Pastucha from Deloitte expects the gross domestic product of the Czech Republic to fall by roughly 0.4 percent this year. “The biggest obstacle will be the decline in household consumption, low investment activity due to high interest rates and weak demand from abroad, especially from Germany. Next year, we expect GDP to grow by roughly two percent, mainly thanks to the recovery of household consumption due to growth in real incomes,” he added.
So far, according to statistics, people are saving more and more. Compared to August, they spent 0.4 percent less in September. They are dealing with high prices and are worried about the further development of the economy.
Year-on-year sales for non-food goods fell by 5.9 percent, for food by 4.1 percent. Clothing and footwear stores recorded a significant decrease, where sales fell by 16.1 percent compared to last year. “Most of us will survive this winter in a coat from last year,” said Šichtařová.
The sales of traders with household products, spending on culture, sports and recreation as well as computers or mobile phones are also significantly lower. So far, only fuel sellers and drugstores are reporting better sales. On the contrary, e-shops also decreased slightly year-on-year.