As the deadline date for Brexit looms ever closer, Czechs are asking themselves what the economic impact of a “hard” Brexit would be. A report published by Česká spořitelna, says that as the country’s fifth largest trading partner, the UK’s exit on WTO rules could cost tens of thousands of Czech jobs and around CZK 55 billion. However, the economic impact would be too small to affect projected economic growth.
The Brexit saga has proven to be unpredictable and far from over, but as the deadline date of March 29th looms ever closer and the possibility of a hard Brexit becomes more real by the day, Czech media and economists are looking into what the various scenarios would mean for the country.
Tereza Hrtúsová is an analyst from the country’s largest bank, Česká spořitelna, which recently published its own projection of how Brexit could affect the Czech Republic. Asked about the impact on the Czech economy in case of a “hard Brexit”, which would result in the UK leaving the EU completely and trading on WTO rules, she had this to say.
“According to our analysis, Brexit may cut Czech GDP by up to 55 billion which is about 1.1 percent of GDP. That could mean the loss of 40,000 Czech jobs. Most affected would be the automotive, electronics and engineering sectors.”
The projected cut in GDP is unwelcome, but unlikely to cause great impact. With the Czech National Bank’s GDP growth projection in 2019 currently lying at 3.3 percent, a hard Brexit would lead neither to a recession nor slow down growth enough to cause economic stagnation.
The impact would be relatively low because little of the actual value of exports is retained in the Czech economy. In the case of the most affected sectors such as car manufacturing and electronics, retained value only lies at 43 and 38 percent respectively. A surprisingly welcome consequence of what many describe as the “fitting-shop” economy, which relies heavily on assembling products rather than their research and development.
“The worst case scenario would hit our citizens that live or study in Britain as well. Uncertainty surrounding the recognition of their academic titles and pension rights would arise. These questions are surrounded by a thick layer of smoke right now and we would have to start unravelling them very quickly.”
Whether “hard” or “soft”, Brexit is sure to affect the Czechs in one way - Britain is the largest non-Eurozone member, and its departure will give the Eurozone camp an even larger comparative voting majority than it has now. Furthermore, after Brexit, Czech GDP per capita is likely to rise relating to the EU average, slashing the amount of EU funding the country receives.