Compared to the last quarter of last year, the economy grew by half a percent. “Growth was positively influenced by domestic demand, especially higher expenditure on household final consumption, and gross capital formation,” states the website of the Czech Statistical Office. In other words, people finally got the appetite to spend, and European subsidies helped along the way.
The Czech Republic exceeded the pre-crisis level, yet from the point of view of the first quarter, it belongs to the five countries that dealt with the crisis of 2020-2023 the worst. In Europe, the rule was that the four strongest economies, from Germany to Italy and France to Spain, had the biggest difficulties with covid, inflation and the energy crisis. None of these economies have grown by more than five percent over the past five years. Next to them, only the Czechs and Austrians had the same problems, to which the Finns and Estonians joined after the Russian invasion of Ukraine.
The reason for this is the fact that the Czech Republic was one of the states that ordered a rather stricter lockdown for entrepreneurs during the pandemic. At the same time, the domestic export economy is too dependent on Germany and, like its western neighbors, suffered the most from the disruption of global trade chains.
The local economy was also damaged by ill-conceived government policy. Kurzarbeit for businesses, tax cuts and increases in benefits and salaries of civil servants were the reason why GDP was driven down by the second highest inflation in the EU, including the inflation of the real estate bubble. Government regulation did not prevent energy prices from rising the most in Europe after Estonia in 2021-2024.
Also for that reason, the Czech Republic, in terms of economic growth, cannot be compared with other European countries of the same or smaller size, let alone post-communist states. In some of them – from Lithuania through Poland, Croatia and Slovenia to Romania and Bulgaria – economic performance in times of crisis strengthened by at least a tenth.
According to analysts, the Czechs are not out of the worst yet. “We assume that the real spending of the population in particular grew relatively briskly, on the other hand, it was probably not so cheerful in a number of export-oriented industries,” explains Jan Bureš from Patria bank. At the same time, the balance of exports and thus of industry may soon improve if the main domestic partner, i.e. Germany, strengthens its exports. According to the Federal Statistical Office, it was precisely foreign trade that ensured at least moderate growth for the neighbors at the beginning of the year.
Unlike other countries, energy prices have not yet started to fall in the Czech Republic. The already quoted Jan Bureš also assumes that the real estate market will wake up soon.
As a result, it cannot be ruled out that the scenario that occurred after the financial crisis of 2008-2013 will be repeated. The economy began to catch up with the shortfall from these years so quickly that it grew by 15.4 percent during the four years of Bohuslav Sobotka’s government. In Europe, such growth was hard to find competition. According to Eurostat, the economy grew just as fast in Poland, and only Romania was slightly better. However, the economies of these countries started from a lower base.
