Economist: strong Czech GDP growth likely to continue

The Czech Republic is currently benefiting from a number of positive economic indicators, including strong GDP growth of 4.4 percent, low unemployment of 6.2 percent, and low public debt. But will the "boom" continue, or is the country merely riding the wave of a short-term economic bubble? I spoke with Charles University economist Michal Mejstřík for his take, and began by asking him to explain the factors behind the current strong economy.

Michal Mejstřík, photo: Alžběta Švarcová

“Look at the figures. The Czech Republic had been slowing down in the last couple of years. But very low levels of indebtedness, which is close to 40 percent of GDP, and a sudden huge flow of final investments coming in from the EU’s restructuring funds, mean that we are experiencing a fortunate combination of huge public investments, specifically in infrastructure, and also private companies investing more. Growth is also being supported by strong exports. Basically, our companies are working at full throttle and unemployment is close to a historical minimum.”

Yes, right now we have 6.2 percent unemployment, compared to the EU overall, which has 9.5 percent. So this is another strong indicator.

“Absolutely, because it means the country is using the full potential of its economy. We also have the latest data suggesting around 100,000 available work places, so the overall sentiments are very positive.”

Some companies are complaining that there is a lack of qualified labour in the country – that the Czech Republic has not set itself up to be a more dynamic economy, and that it is still very dependant on unqualified workers…

“I would not say so. If you look at the nature of investments all around, then there are strong fields such as IT. The only point is that there is some untapped potential. I would suggest that there is a good combination of qualified and unqualified labour. Both are being utilized.”

The companies complaining that they cannot find qualified personnel – what can the Czech Republic do to address this problem?

Illustrative photo: Office of Czech Government

“This is nothing like a critical problem. Of course, it is partly a matter of salary levels, which are also growing these days. It is up to these companies to make a good offer.”

At the moment, the government is debating the proposed budget for next year. The opposition is expressing concerns that the projected deficit is too high. What are the various debates taking place over future spending levels?

“General government indebtedness is pretty low by European standards. Somewhat above 40 percent. So current expectations are to have a 1-1.5 percent deficit for the next year. This is also pretty low by European standards. There are also strong proceeds flowing in due to the economic growth, so then you can increase public expenditures as a result.”

Do you believe that this current boom is sustainable? Is there a danger that it might be a bubble?

“I would not go as far as to say it is a bubble. Of course you may not grow by 4.4 percent every quarter, but maybe 3.5 percent or thereabouts. But I believe we can expect significant growth next year, too.”