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2018/08/02 / Erste Group Research

Special Report, Czech Republic: Czech economy would withstand fallout from US car tariff




If the introduction of car tariffs did not trigger a trade war, the Czech economy would withstand such a situation without any problems. Even trade wars would not cause any drama, only a greater slowdown in the growth of the Czech economy.

Negative impacts would be reflected first in exports and then gradually transmitted to the labor market and the development of domestic demand.

A 10% fall in demand would result in GDP growth being lower by around 0.2-0.3pp. If demand fell by 25%, the Czech economy would grow more slowly by about 0.6-0.7pp. In the case of trade wars, the impact on GDP growth would be roughly a negative 1.5-1.7pp.

At the current level of the EURCZK exchange rate, the risk induced by the introduction of tariffs is already largely captured. Of all possible scenarios, only significant deterioration in the world economy would have any major impact on the koruna exchange rate. Overall, we expect that the koruna will gradually return to a slowly strengthening trend, which will be supported by the increase in the CNB's rates.

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General information

AuthorErste Group Research
Date2018/08/02
Languageen
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusCzech Republic
Currency in focusCzech Koruna
Sector in focus-
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