Social and economic indicators of development in Czech Republic 2006-2017

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Socialand economic indicators of development in Czech Republic 2006-2017

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Socialand economic indicators of development in Czech Republic 2006-2017

GDPgrowth rate

TheCzech Republic is among the most industrialized and developedeconomies in eastern and central Europe. About 24 percent of thestate’s product is from the manufacturing sector. Householdconsumption is the main GDP component accounting for about 48 % onthe total expenditure. Capital formation follows with 25 percent andgovernment spending with 19 percent. Goods and services for exportaccount for 84 % of GDP with imports accounting for 77 %.

Inthe last quarter of 2016, earnings advanced by 0.4 percent.Consumption by the household rose by 0.7 %. Exports rose to a 2.1%with imports decreasing to a 1.8 percent. The same period governmentspending reduced by 0.6 percent. The growth rate in GDP for thecountry averaged 0.58 % from 1996 to 2016 (CzechRepublic Economy,2017)

Publicdebt to GDP

CzechRepublic was not affected by the financial crisis of 2007-2010 likelydue to their stable banking sector. In Eastern and Central Europe,the state has the smallest public debt. A large percentage of thehousehold debt gets held in the local Czech currency signalingstrength of the economy. Government debt summed up to 41.10 % of thecountry’s GDP in 2015. There evidence of a steady rise in debt fromthe year 2008 though manageable. The country experienced the highestdebt of 45.1% in 2013.

GrossDomestic Product (GDP)

Theeconomy of Czech Republic strengthened in the fourth quarter 2016,after a disappointing third quarter. Massive private consumption andfavorable external sector spearheaded the growth in the last quarter2016. GDP increased from 1.8 % to 1.9% in the last quarter of 2016.The growth in the economy was as a result of robust privateconsumption contributing a 1.4 % growth. The sharp deterioration inthe fixed investments got offset by the positive contribution by theexternal sector. The move led to a rise in wages, low inflation and arobust labor market. The investment impact of the reduced absorptionof assistance from European structural and investment fund continuedto diminish the last quarter of 2016 deteriorating from themanageable 5.0% reduction witnessed in the previous quarter (Q3).Also, the government consumption flattened in Q4 after decreasewitnessed in Q3. Imports reduced by 1.2 % in the fourth quarterindicating less demand of foreign products and services in thecountry. There was a moderate growth decelerating from 2.4 % in Q3 toa 1.9% in Q4.

Unemploymentrate

Employment,as derived from the labor market, improved in early 2017 contributingto a fall in unemployment level in January 2017.This improvement is asign of positive progress of the economy. In Q4 of 2016, there was adisappointing growth may be due to the drop in fixed investment whenthe EU investment funds seized (Ham,Svejnar &amp Terrell, 2014)

Year20112012201320142015 2016 2017

UnemploymentRate6.7 6.87.7 7.76.56.2 6.0

Inflationrates

Thestate consumer prices raised by 0.4% in the last quarter of 2016, butthere was decrease by 0.8% the first quarter of 2017. Czechstatistical office stated that there was a rise in costs of food andnon-alcoholic beverages in addition to recreation and culture.InFebruary 2017 inflation raised to over four years high of 2.5 percentfrom a previous point of 2.2 %. The Czech National Bank had anestimation of 1.0 % hence increasing above annual average inflationtargets (Carlos,2014).

Suggestionsof how The Country Could Improve its GDP, Unemployment, Debt

Thecountry should focus on growing public investment to boost thecountry’s GDP. The EU funds if well invested can strengthen growthand also bring fiscal sustainability. An expansionary monetary policyshould also be explored to level investment-GDP. It is also necessaryto set a debt target and maintain a minimum level of public debt soas to lower the risk of going beyond the debt ceiling. Thestate-owned enterprises should be transformed in a way that thegovernance privatizes minority shareholdings to create moreemployment opportunities.

Sincethe country’s economy has recently recovered from a global crisis,revision of its inflation forecast is of the essence. The CNB (CzechNational Bank) can pursue a more accommodative monetary policy andhave an exchange rate regulation system that can intervene in theforeign exchange market.

References

Carlos,M. (2014) Inflation persistence: facts or artefacts. WorkingPaper Series

CzechRepublic Economy – GDP, Inflation, CPI and Interest Rate.(2017). FocusEconomics | Economic Forecasts from the World`s Leading Economists.from http://www.focus-economics.com/countries/czech-republic

Ham,J. C., Svejnar, J., &amp Terrell, K. (2014) Unemployment and thesocial safety net during transitions to a market economy: evidencefrom the Czech and Slovak Republics. AmericanEconomic Review,1117-1142.