Czech 2021 economic growth beats expectations, but still below pre-Covid level

The Czech economy grew by 3.3 percent last year, according to preliminary estimates from the Czech Statistical Office (ČSÚ). While the growth is significant, it is only a partial recovery from 2020, when the gross domestic product (GDP) fell a record 5.8 percent due to the pandemic. Economists expect the economy to reach pre-pandemic levels later this year.

In the fourth quarter of 2021, the gross domestic product (GDP) rose 3.6 percent compared to the same time in 2020. The year-on-year growth was mainly influenced by domestic household spending and gross capital formation. Successful economic areas for adding value included trade, transportation, and accommodation and food service. Industry reported a decrease.

Compared to the third quarter of 2021, the fourth quarter grew by 0.9 percent. The quarter-on-quarter growth was mainly supported by an increase in foreign demand.

The economy shrank in all four quarters of 2020 and in the first quarter of 2021 but has been recovering since then.

The full-year growth for 2021 exceeded most analysts’ expectations. On average, they predicted a rise of 2.9 percent compared to 2020. Estimates for both the year and the fourth quarter varied widely though. The Czech Finance Ministry had predicted stagnation between the third and fourth quarter, while the Czech National Bank had predicted a drop of 1 percent.

“In view of the significant problems in the domestic automotive sector in the second half of last year, the resulting GDP growth can finally be considered a success, although the level of output has not yet fully returned to its pre-Covid values. The development of the domestic economy in the fourth quarter of last year was finally much better than it looked in September and early October,” Akcenta analyst Miroslav Novák said, according to the Czech News Agency (ČTK).

Jakub Seidler, chief economist of the Czech Banking Association, said that given the development of the pandemic, the problems in the industry, and the energy crisis, a full-year figure above 3 percent was ultimately positive news. He expects the economy to grow by around 3.5 percent this year.

ČSOB analyst Petr Dufek was more optimistic and said there is a good chance that this year’s economic growth could exceed 4 percent.

Other economists agreed in general that the growth in 2022 would at least wipe out the remainder of 2020’s decline.

Employment increased by 0.1 percent in 2021. In the fourth quarter of 2021, employment remained unchanged, compared to the previous quarter; when compared to the corresponding quarter of the previous year, it increased by 1.3 percent, according to the ČSÚ. The Czech Republic currently has the lowest unemployment in the European Union, according to Eurostat.