Economic growth forecasts for the Czech Republic may be looking a bit gloomy following the publication of the International Monetary Fund’s (IMF) latest upbeat predictions for the region. But not all the crystal ball gazers look like they are going to up their predictions.
Economic forecasts are often a lot like sheep: they tend to congregate together and follow a lead. So the latest IMF world economic forecast released on Tuesday could create the Czech equivalent of an ovine stampede to higher levels.
Put simply, the IMF admits in the report released on Tuesday that growth at the end of last year was a lot stronger than it expected. As a result, it has sharply upped its growth predictions for 2014 and 2015 from the last batch of figures put out in October 2013.
Central European economies are now seen growing by 2.8% this year and by 3.1% in 2015 as opposed to the former forecast of 0.1% and shrinkage of 0.2%. Last October the IMF separately saw the Czech Republic doing better in 2014 with growth at 1.5%.
For the Czech Republic’s biggest trading partner, Germany, the latest IMF figures are 1.6% and 1.4% after the earlier predictions of insipid, almost zero, growth. Of course, the statistics are accompanied by the usual batch of cautionary qualifiers which mainly warn leading economies not too turn off the tap on their former stimulus measures too quickly. Nevertheless, while not out of the woods, the worst now appears with the IMF forecasting world economic growth of 3.7% this year.
Most Czech economic forecasts for this year are well below even the IMF’s more sombre predictions released back in October. They range between the trade union confederation’s best case scenario of 1.0% growth and the Czech National Bank’s 2.1%. The Czech Banking Association has taken its stand at 1.9% with the Ministry of Finance going for 1.3%.
Actually, the Czech and Moravian Confederation of Trade Union’s worst case scenario for this year is zero growth with the possibility that economic stagnation will continue until 2016. That warning was issued as recently as Tuesday when the confederation outlined its fears, forecasts, and appealed for greater government action.
The unions’ argument is that the previous centre-right governments have done so much to depress domestic spending, especially public investment in long-term infrastructure projects, while eroding the tax base that it will take a considerable time to turn this around.
It might be fashionable to downplay the unions’ gloom and look on the bright side. But the confederation economists actually proved to be more on the mark about the depth and length of the Czech recession than most of their private sector, state, and international counterparts, including the IMF. The next 12 months should determine whose crystal ball is performing best.