The Czech Republic is not ready for crises. Neither security nor economic. Since 2020, Czechs have become enormously poorer due to inflation, which was contributed to by the government of Andrej Babiš, the government of Petr Fiala, and the central bank by not raising interest rates. The continuation of the rapid rate of indebtedness of the state has not been stopped, and the expenditure on servicing the debt is a very dangerous burden.
The latest annual report of the Supreme Audit Office (NAO) begins by stating that the Czech Republic is not sufficiently prepared for crises and extraordinary events. The state of protection of the population is being neglected, the number of permanent shelters is decreasing, and there is also a lack of protective suits and other means. These substantial deficiencies become even more worrisome in times of ongoing Russian aggression.
However, the control office is primarily involved in the management of the state. It was not possible to significantly reduce the rate of indebtedness, there was no economic growth and high inflation led to a record decrease in the real income of households, i.e. to their impoverishment. The SAO also draws attention to the threat of a reduction in the quality of life in the Czech Republic.
The debt increased by 216 billion crowns year-on-year, reaching more than three trillion crowns at the end of the year. Since 2019, debt service expenses have grown by almost 29 billion in total to more than 68 billion crowns. And although in European comparison we are still among the less indebted countries, the rate of growth of national debt is one of the highest in Europe. And as the SAO notes, this is just shifting the burden to the next and next generations.
The inspectors also pointed to a very high rate of inflation, which, according to statistics, reached an average of 10.7 percent last year. According to a Eurostat comparison, it reached 12 percent and was the second highest in the EU. This marked the growth of real wages, which did not have a chance to catch up with high inflation. For eight quarters, i.e. two years in a row, people’s real earnings fell, and our standard of living fell the most among the OECD countries. Real purchasing power last year was approximately at the level of 2018. So it was a steep fall. Czechs experienced such a sharp decline only at the turn of 1997 and 1998, when the decline lasted “only” a year.
The downward trend has now reversed and real wages have also been rising for several quarters in a row, as their quarter-on-quarter growth has outstripped the quarter-on-quarter growth in inflation. Despite their gradual growth, the level of real wages last year remained more than ten percent lower than their peak in 2021. For the whole of this year, real earnings are expected to grow by three to four percent and annual inflation around three percent.
The latest February figures showed that inflation has reached the target of two percent, but it will leave its consequences for a long time to come. Since 2020, the prices of goods and services have increased by more than 30 percent.
Tags: threat quality life Czechs state manage expenses poorer
