New data shows Czech economy recovering better than expected after Covid-19

The Czech Republic's economy surpassed its pre-Covid-19 performance earlier than initially expected, according to the Czech Statistical Office, and is showing constant signs of improvement despite still lagging behind its neighbors.

The revised data showed that the country's GDP caught up to its pre-Covid level back in 2022, rather than last year. This news comes as a welcome surprise to many analysts, who were previously concerned about the country's economic recovery.

"This revision highlights that the Czech economy is stronger than many thought, with increased household consumption and corporate investments," Vít Hradil, chief economist of investment company Cyrrus, told Czech media outlet iDnes.

The revised data also revealed that the reported drop in corporate investments during the pandemic did not actually occur – contrary to previous reports. This news has brought a sense of optimism to the country; Czechia has not experienced a technical recession since the pandemic.

"The original data had a bad effect, portraying the Czech economy as the worst in the EU. This could have had a negative impact on the mood of the population and consumer behavior," explained Hradil. New data shows that Czech GDP surpassed CZK 6.2 trillion in 2023, up from CZK 5.8 trillion in 2020.  Public debt is at record levels, surging past CZK 3 trillion this year.

However, despite the positive revision, the country's economy is still facing challenges due to the energy and inflation crisis. “Compared to other EU countries, together with Germany, we are among the slowest to recover from the energy and inflation crisis," pointed out  Raiffeisenbank economist Martin Kron.

The revised data aligns with forecasts from the Ministry of Finance and the Czech Banking Association, predicting GDP growth of 1.4 percent this year and 2.6 percent next year. However, the country is still lagging behind its Central and Eastern European counterparts, who are expected to see an average growth of 2.7 percent this year and 2.9 percent next year.

"The biggest driver of growth will continue to be private consumption," stated Dan Bucsa, chief economist of UniCredit for Central and Eastern Europe. Foreign investments, however, will remain relatively constrained and may hold back growth.