Analysts: Iran war threatening Czech growth

The war in Iran and related supply-chain disruptions are gradually pushing up prices of goods and services in the Czech Republic. Analysts warn that if the conflict in the Middle East does not end soon, the country could face a sharp rise in inflation and slower economic growth.

Despite government price caps, the average petrol price at Czech filling stations has risen by more than eight crowns per litre since the end of February, while diesel is ten crowns higher. Expensive fuel and higher costs have already led companies to scale back investment activity. Another concern for the Czech Republic is renewed weakness in the German economy, on which much of Czech industry depends.

The Czech economy grew by 2.1 percent year-on-year in the first quarter, when the effects of the Iran war were not yet fully felt. Economists say that in the event of a prolonged conflict, growth could slow to around 1.5 percent, while consumer price inflation could accelerate to at least 3 percent from the current 2 percent.