Next year there will be a turn for the better, but earnings will be swallowed by inflation, Schiller predicts

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The Ministry of Finance assumes that after this year’s deep decline of 6.6 percent, the domestic economy will recover from the coronavirus shock next year and grow by 3.9 percent.

The office of Minister Alena Schillerov√° stated this in the latest forecast of macroeconomic development, ie in a document that was eagerly awaited, because it will also develop the compilation of the state budget for next year.

“The Czech economy is fundamentally affected by the pandemic of a new type of coronavirus. Measures taken to prevent the spread of the disease caused an extremely deep recession in the first half of 2020, “the prediction describes at the outset.

Schiller and her experts are working with the scenario that no further significant general restrictive measures will be taken. In other words: that the government will no longer switch off the economy centrally as in the spring. However, the dramatic development of the disease in recent days raises fears that further, new restrictions will come.

According to the document, economic activity should gradually recover. “The shock to aggregate demand and supply should only be temporary and one-off. Overall, we expect a drop in economic output of 6.6% for 2020. There should be a deep decline in all components of use except general government consumption. The recovery in economic activity should be reflected in GDP growth in 2021, which we estimate at 3.9, “the document states.

Real wages will continue to fall next year

Due to the economic downturn and the associated decline in demand for labor, employment should fall this year. The unemployment rate should also increase. The economic situation should also be significantly reflected in the dynamics of earnings, with a decline in the average real wage this year and in 2021.

“Therefore, we expect public finances in 2020 with a deficit of 6.4% of GDP and debt growth to 39.4% of GDP,” says Schiller.

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