The basic forecast scenario is based on the assumption that the war in the Middle East will end within three months. In that case, GDP would grow by 2.6 percent this year, driven mainly by household consumption, which would increase by 3.2 percent. Government consumption would grow by 2.4 percent, investments by 2.9 percent. Industrial production would increase by 1.5 percent, unemployment in the methodology of the Czech Statistical Office would amount to three percent.
The pessimistic forecast scenario assumes that the war will last five or more months. In such a case, GDP would increase by 2.2 percent, as the effects of the conflict would lead to a dampening of household consumption, investment, and industrial production. In this scenario, household consumption would increase by 2.5 percent, as would investments. Industrial production would increase by one percent, unemployment would be 3.1 percent.
An even more significant impact of a prolonged conflict in Iran would be on economic performance next year, when GDP would grow by only 1.4 percent instead of 2.3 percent and inflation would reach 4.2 percent instead of 2.7 percent.
“In the event of a long-lasting conflict, high oil prices and the disruption of trade chains would last until the summer months, and the impacts would be significantly carried over to 2027. In particular, outages in the supply of raw materials for the chemical industry and semiconductor production could lead to a slowdown in production in the automotive, engineering and digital sectors after stocks are exhausted,” said Pavlína Žáková on behalf of the Union of Industry and Transport.
According to her, the Czech economy is more sensitive to similar shocks due to strong industry and high openness.
After the outbreak of the war in Iran, which began with an attack by the United States and Israel at the turn of February and March, so far only the Ministry of Finance has published a macroeconomic prediction. According to him, this year GDP will increase by 2.1 percent, average inflation should be 2.5 percent.
