Shape of the czech economy

Gross domestic product (GDP) per capita is an economic metric that breaks down a country's economic output per person. Economists use GDP per capita to determine how prosperous countries are based on their economic growth. GDP per capita is calculated by dividing the GDP of a nation by its population. Countries with a higher GDP per capita tend to be those that are industrial, developed countries.

-          Czechia is below the European average

-          GDP in general varies a lot between the EU countries (highest: Luxembourg, lowest: Bulgaria)

-          Luxembourg result is due to a statistical issue (only a few people working in L are also living there, this influences the GDP)

-          Several indicators: adds exports and imports in terms of GDP

-          Czechia has a very high openness in comparison with US/Japan (but also higher than Germany/France)

-          Trade openness always connected to the environment/ worldwide movements

• germany (31%)

• Slovakia (8%)

• Poland 6,5%)

-          Key export partners are countries of EU

-          Direct exports to Germany and Slovakia (often though Germany also exports Czech goods to Asia/US etc)

-          Around 80% exports to EU

-          Most important import countries in EU Germany (26%), Poland (9,6%), Slovakia (5.8%)

-          Outside of the EU: China (10,5%)

• inflation i CR was a lot worse than european average

• also in all item HICP and overall index excluding energy, doof, alcohol and tobacco

• 2022 and 2023 the worst

harmonized index of consumer price

almost 20 %

o   Slokavia vs Czechia

o   Current inflation is around 6/7% (?)

o   Almost no difference between the states atm, not sure who will reach the inflation target earlier, both ok

????in 2025 it will be around 1,7 - 2,5 ??

-          Rising interest rate of CR in 7/21 (CNB) – Czech national bank

o   Continuity in increase until 8/22, then plateau

-          Rising interest rate of CR 7/22 (ECB) – European central bank

o   Continuity in increase

o   ECB 4,5 % in 10/2023

-          Prognosis: interest rate will decrease in 24/25

-          Price of oil and other commodities, restriction agains russia

-          Global supply chain problems (covid, Ukraine war)

-          CR very industrial orientated, industry is energy intensive, energy prices are high

-          Expectations about the inflation development in the next years

-          Helps understand why Czech central bank had a interest increasing  

-          Public has to belief in the inflation expections of the central bank à persuade the public

-          If the public believes that the inflation will be lower, the behaviour of the public will accommodate to the inflation expectations (self fulfilling prophecy)

-          How to get this information? Possibility to ask people what they believe how inflation will develop and then work with statistical forecasts

-          Inflation perceptions at time of introducing euro banknotes

o   The inflation after changeover was perceived as really high (people were convinced about high inflation through the euro, so they perceived the prices as a lot higher)

o   The measured inflation was actually a lot less

o   Sometimes bad timing (expl. Croatia had high inflation and people caused it to euro changeover)

-          If crown is “too strong” (higher value of it) one should sell crowns and buy euros (or alternative)

interventions by the government to control de/inflation

o   Inflation was really low worldwide

o   To prevent deflation the central bank used interventions

§  Avoiding deflation – a weaker exchange rate makes imports more expensive

o   Interventions: purchases of euros

o   Interventions capacity is unlimited

o   Avoiding excessive weakening of koruna ( a stronger exchange rate makes imports cheaper)

o   Intervention: sales of euros

o   Intervention capacity: limited by the volume of foreign exchange

-          Unemployment in CR is the lowest In EU (and below the average EU)

-          (measure of number of unemployed persons against number of vacancies)

o   Demand for labor was huge

-          ( real = income adapted to inflation)

o   Dramatically decline of real wages (bc of the huge inflation)