Economic policy
This section reports on economic policy initiatives of the Czech government, the EU, and other entities that have a direct impact on the competitiveness of the country. It also includes information on economic priorities of the AmCham and other leading associations.
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Spotlight issue
Czech Republic: Double digit fall in 2Q growth
The Czech economy contracted by 8.4% quarter-on-quarter, or 10.7% year-on-year, which is an unprecedented fall due to the Covid-19 outbreak. The flash 2Q print was, however, a bit better than the market expected, though some revision might come later
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CEE implications from the EU recovery fund
EU recovery fund and the EU budget is positive for the CEE region with the EU transfers into CEE in the 2021-27 period rising vs the prior budget. As the new EU wide funding means lower downside risks to the CEE key export market and higher odds of a synchronised EU recovery, this is clearly a positive for CEE FX. CZK remains our top pick and we look for lower PLN/HUF
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Despite a slight recovery in the Czech economy, the outlook remains uncertain
The Czech economy improved slightly in May but still lags behind the pre-crisis level of economic activity. Despite a month-on-month increase of more than 10%, industrial production is about a quarter lower. Of the industries, the automotive industry is currently the worst performing. Unfortunately, the fall in new orders by almost 35% in May does not give much optimism to the future. Currently civil engineering, whose production increased 1.2%, cannot complain about demand. In building construction, on the other hand, production decreased 11%. Despite weak demand from the domestic and foreign economies, however, unemployment in the Czech Republic remains low for the time being, at 3.7% in June, according to the Ministry of Labour and Social Affairs. In our opinion, the main reason is the Antivirus programme.
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