The economy of the V4 countries will grow. How will the Czech Republic fare?

The Organization for Economic Co-operation and Development (OECD) raised its outlook for global economic growth this year to 3.1 percent, up from 2.9 percent in February, it said in its updated outlook. The Czech Republic will perform the worst of the countries of the Visegrad Group (V4) and is the only one of the V4 to fall behind even the OECD average, the organization predicts.

The OECD also expects an improvement in the growth of the global economy for next year, when the economy according to the current forecast will show growth of 3.2 percent. A quarter of a year ago, the OECD expected three percent growth. Among other things, armed conflicts in the Middle East and Ukraine continue to have an adverse effect on the economy. Last year, the global economy grew by 3.1 percent.

“The effects of stricter monetary conditions are still felt, especially on the housing and credit markets. However, global activity is proving relatively resilient,” the OECD states in its updated report. “Inflation is falling faster than originally thought and confidence in the private sector is improving.”

Growth this year and next year will again be ensured in particular by the United States. For them, the OECD has improved the gross domestic product (GDP) growth outlook to 2.6 percent for this year, while in February it forecast growth of 2.1 percent. The OECD increased their growth outlook for next year by a tenth of a point to 1.8 percent, against the February forecast.

Poland reigns supreme among the V4 countries

For the Czech Republic, the OECD predicts GDP growth of 1.1 percent this year and 2.4 percent next year. It will do best among the V4 countries Poland, which the OECD predicts will grow by 2.9 percent this year and 3.4 percent next year. The organization forecasts GDP growth of 2.1 percent for Slovakia and Hungary this year, and 2.7 percent for Slovakia and 2.8 percent for Hungary next year.

It will be from developed countries especially Germany lags behind, which the OECD predicts will grow by 0.2 percent this year. Next year, the organization expects the pace to accelerate there to 1.1 percent. For the entire eurozone, where Germany is a key economy, the OECD improved the growth outlook for this year to 0.7 percent. This is a tenth of a percentage point more than the OECD expected in February.

For China, the OECD predicts growth of 4.9 percent this year and a slowdown to 4.5 percent next year. In the case of Russia, the organization expects GDP growth of 2.6 percent this year and a slowdown to one percent next year.

The OECD expects the United States to start cutting key interest rates from the third quarter of this year. The prime rate there is now in the range of 5.25 to 5.50 percent, a 23-year high. The OECD assumes that the US central bank (Fed) will reduce the base rate to a range of 3.75 to 4.00 percent by the end of next year. In the OECD eurozone, reductions are also expected to begin from the third quarter, and by the end of next year, the deposit rate of the European Central Bank (ECB) is expected to drop from the current four to 2.5 percent.