Export boost drives Czech rebound
Exports of goods in the Czech Republic have surpassed pre-pandemic levels, reports the latest trading insight report by Atradius.
The trade credit insurer’s new Czech Republic Country Report reveals total exports are forecast to rise 10.5% in 2021 following a marked decline of around 7% last year. Atradius expects this increase, along with manufacturing growth and domestic recovery, to drive economic rebound in the Czech economy.
Atradius reports that after Czech GDP contracted by 5.8% in 2020 and a further 0.3% in Q1, economic recovery has since been gaining momentum. GDP is now forecast to rebound by 3.6% this year and accelerate to about 4.5% in 2022. Atradius expects economic activity in the Czech Republic to recover to its pre-pandemic levels early next year.
Czech recovery has been supported domestically by declining coronavirus cases, an improving vaccination rollout and the lifting of restrictions. In addition, consumer confidence has reached its highest level since December 2019 while the manufacturing purchasing manager index hit an all-time high, fuelled by new orders. Simultaneously, export growth plays a key role due to the Czech economy’s high integration into international value chains; at almost 70%, its export-to-GDP ratio is one of the highest in the EU. However, while goods exports have surpassed pre-pandemic levels, service exports are still low due to subdued tourism influx.
Looking forward, Atradius forecasts private consumption will continue to increase, rising by more than 6% next year, driven by pent-up demand and further decreasing unemployment while exports and industrial production will expand by about 3% each.
Atradius also reveals that, due to the ongoing rebound, the performance outlook of the machines, metals, services, steel and textiles sectors has been upgraded from ‘poor’ to ‘fair’. Forecast to grow more than 6% this year, the metals industry is buoyed by the recovery of domestic industrial production and higher demand from aboard. Steel and metal producers are benefiting from higher sales prices due to increased demand and shortages of products while the service sector is benefiting from the lifting of lockdown measures. However, Atradius warns the performance of some main sectors remain subdued. Construction businesses have been affected by postponement of projects and a reduction in order volumes during the recession, while automotive industry performance is currently hampered by semiconductor shortages and higher input prices.
James Burgess, head of commercial at Atradius UK, commented: “Despite the prevailing grip of the pandemic across the global stage, the Czech Republic is a market demonstrating strong fundamentals with accelerating economic rebound, rising exports and increasing private consumption leading to an improved outlook for several sectors. However, a rise in insolvencies in the coming months cannot be ruled out particularly amongst businesses exposed to increasing costs for materials, commodities, labour and energy. For businesses trading in this market, Atradius’ message is clear; be prepared for any circumstance, proactively mitigate against the ever-changing risks and seek protection from non-payment.”