Decrease in Germany’s 2019 growth forecast will not affect Czech Republic, say analysts

The German Central Bank has published a prediction on the country’s expected economic growth for 2019. It lowered its expectations from 1.6 percent to 0.6 percent. The Czech manufacturing sector is very dependent on German economic strength and Germany is also the Czech Republic’s largest trading partner. However, analysts questioned by the Czech News Agency say that changes in the forecast were expected and will not affect the Czech economy.

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On Friday, Germany’s Central Bank issued a new forecast for the country’s GDP growth in 2019. While in December it expected the economy to grow by 1.6 percent, the new prediction is 1 percent lower.

The health of the German economy is traditionally followed with much attention by Czech economists, not only because Germany is the largest trading partner of the export focused Czech Republic, but also because many of the largest businesses in the country are owned by German companies.

However, the change in the forecast was expected, Cyrrus analyst Michal Brožka told the Czech News Agency. He says that while the slowdown in German industry will have negative consequences on the Czech economy, growth is likely to remain above 2 percent this year.

UniCredit Bank analyst Pavel Sobíšek says that a large segment of the Czech economy will have to count on a decrease in demand, but agrees with Mr. Brožka, saying that UniCredit and colleagues from other institutions in the Czech Republic have been counting on a German economic slowdown when preparing their forecasts.

The reason why the development of the Czech economy will not follow the German pattern in exactly the same way is due to important sectors, such as construction, being able to count on a continued demand, Mr. Sobíšek told the Czech News Agency.

However, he says that if the German economy continued to slow down next year, the Czech Republic would be more strongly affected.

The German Central Bank’s Friday forecast also included 2020. Although here too the prediction was lowered from 1.6 percent to 1.2 percent, the expected growth still supersedes 2019.

Raiffeisenbank analyst Helena Horská said the German Central Bank’s more positive forecast for 2020 and 2021 is not received as optimistically by her and her colleagues. She says that trade disputes and Brexit could strench on for longer.