ODS.CZ – (ČRo Plus) Former Prime Minister Petr Fiala stated in his report on the state of the country that Czechia is in good shape according to key economic indicators, but his successor Andrej Babiš (ANO) refused to read the document. „The Czech economy is doing relatively well,“ explains Jan Skopeček, Deputy Speaker of the Chamber of Deputies, in the programme Pro a proti (For and Against).
You can listen to the entire debate with Jan Skopeček on ČRo Plus.
What is your opinion on the state of the Czech economy? Is former Prime Minister Petr Fiala right in saying that Czechia is thriving? According to him, the country is safer, more resilient and much better prepared for the future than it was when his government took office in 2021, Mr Skopeček.
I think that the Czech economy is doing relatively well. If we look at the growth rate of gross domestic product, it will be around 2.4 per cent this year. According to predictions, growth is also expected to exceed 2 per cent next year, and we have managed to control inflation, which was the biggest economic problem we faced during our term in office.
We have moved from double-digit figures back to an inflation target of around 2 per cent. Since 2024, following a decline in real wages due to high inflation, we have seen relatively rapid growth in nominal wages, which, together with low inflation, means that real wages have also been rising recently.
After the downturn, we still have one of the lowest unemployment rates and one of the lowest risks of falling into poverty. I think these are figures that many countries would envy us for.
You know, as a layman and a journalist, I feel that citizens are expected to put up with everything from politicians. The figures can be interpreted from both sides, and politicians manipulate economic data in all sorts of ways. What do you say, for example, to the argument that debt has increased by 1.2 trillion, or that savings have been devalued by up to 40 per cent, according to Mr Ševčík? It's probably less than that, but households have paid a pretty high price for it.
I said again, and I think the professor and I agree on this, that the biggest problem we have experienced economically in recent years has been high inflation. This is undoubtedly a spectre that economists want to avoid in all countries.
Unfortunately, we were unable to avoid it, but the professor will surely acknowledge this and is well aware that the horizon for monetary policy is one to two years. This means that if the Czech National Bank responds today by raising interest rates, for example, this will have an impact on inflation with a delay of one and a half to two years.
If inflation was 18 per cent one year and 17 or 16 per cent the next, then essentially, on average, prices rose by 34 per cent over two years, and some goods by 50 per cent, or double. So who is to blame? The Czech National Bank, for failing to manage it? Or is no one to blame?
The Czech National Bank undoubtedly bears responsibility for inflation; that is its mandate. However, it also operates within a certain economic reality, and we have brought inflation upon ourselves, which I believe the professor will agree with.
During the COVID pandemic, the Czech economy largely shut down. I am convinced that it closed down more than was strictly necessary, but the economy largely ceased production and, on the other hand, huge fiscal stimuli were injected into the economy. In other words, the state poured huge amounts of money into the economy in the form of various subsidies, grants and efforts to save businesses and households.
Any economist will tell you that once production stops growing, once fewer goods are being produced rather than more, and those goods start chasing more money that has been pumped into the economy, it can only lead to inflation.
We set ourselves up for inflation during the COVID period, and this was aided by the previous very loose monetary and fiscal policies. We took over this country at a time when inflation was already underway. We took it over at a time when it was several times higher than the Czech National Bank's inflation target.
As I said, it takes a year and a half to two years for inflation to change, depending on how the Czech National Bank responds, so it is clear that the blame for inflation really lies with someone other than Petr Fiala's government.
And who else?
Under Andrej Babiš's previous government. That was the main reason why real wages fell here. Petr Fiala was not to blame for this, nor was Petr Fiala's government. It was due to inflation that started in the previous election period. That took money away from people.
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