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Finance ministry posts biggest surplus since founding of Czech Republic

Prague Castle. Photo: Bohemist

But scales down economic growth thanks to the British Referendum

By BOHEMIST STAFF

PRAGUE – The Ministry of Finance has posted the biggest economic surplus since the founding of an independent republic in 1993 with 75.6 billion Kč on hand as of the end of July, according to data released today.

The surplus stems from a balance of goods and services apparently exceeding the primary income deficit, which is largely influenced by the outflow of income from foreign direct investment in the form of dividends and reinvested earnings, according to a recent government economic forecast discussing the recent surplus trend.

The data reflects a steadily growing economy, which the government pegged at 2.7 percent year-to-year at the end of Q1 2016. Still, even though ministry finds the economy in good stead, it has revised down its 2016 GDP growth forecast from 2.5% to 2.2% and from 2.6% to 2.4% for 2017 thanks largely to the British Referendum to leave the European Union.

“The expected slowdown of economic growth in the UK and other European economies, which should occur in the forecast horizon as a result of the British referendum, should weigh on foreign demand for Czech exports,” states the macroeconomic forecast posted on July 29. “Given that the decision of the United Kingdom to leave the EU will have an adverse impact above all on the UK’s economy, and with respect to the territorial structure of Czech exports and other export markets, the impact on the Czech economy through the foreign trade channel should be limited.”

“As for domestic demand, some investment projects could be postponed as a result of the increased uncertainty.”

Though the British exit pf the EU continues to be the biggest concern for the Czech economy, there are other external factors the government is worried about, namely the slowdown of the Chinese economy, though perhaps to not such a great extent, the report added.

Nonetheless, experts remain concerned that the Czech Republic is too dependent on foreign markets.

The worrying aftermath of the BREXIT has rocked the European economy as a whole, sending local currencies spiraling, including to a lesser extent the Czech koruna, which fell 3.70 percent against the US Dollar from 23.79 Kč on June 23, the day of the referendum, to 24.67 Kč four days later. It has since begun to rebound, closing out at 24.08 Kč against the dollar today.

The resiliency of the Czech currency however is a sign of a healthy economy, which has also seen year-on-year employment growth touch 2.0 percent in the first quarter of 2016, the highest since the end of 2007, according to government data. Unemployment in the Czech Republic continues to be the lowest in the European Union at 4 percent as of May 2016.

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Bohemist is an upstart news outlet serving the Czech Republic. Feel free to write us at editor@bohemist.cz.

About Bohemist

Bohemist is an upstart news outlet serving the Czech Republic. Feel free to write us at editor@bohemist.cz.

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