The Czech economy encountered a downturn last year, experiencing only its sixth annual decline since gaining independence. The primary driver behind this recession was persistent high inflation, prompting individuals to save more and curtail their spending.

Petr Dufek, chief economist of Banky Creditas, highlighted the significant impact of soaring energy prices on the Czech Republic’s economy. These elevated costs led to a notable increase in inflation, diminishing the purchasing power of the population and hindering the country’s recovery to pre-pandemic levels, a distinction not shared by other European Union nations.

In particular, the price of natural gas surged nearly threefold for some consumers, despite the government’s efforts to cap prices. The resulting financial strain compelled families to tighten their belts, affecting discretionary spending like summer vacations.

Consequently, reduced household consumption contributed to the overall economic downturn. Statisticians reported a 0.4 percent decline in the Czech Republic’s gross domestic product (GDP) compared to the previous year.

Despite the challenging circumstances, there was a slight improvement in the fourth quarter, with the Czech GDP expanding by 0.2 percent from the third quarter. This growth stands in contrast to the stagnation observed in the European Union and the eurozone. However, projections indicate that the Czech Republic and Germany may lag behind their neighbors in economic growth this year.

Analysts anticipate modest growth for the Czech economy, estimated at 0.8 percent, with Germany expecting a meager 0.2 percent expansion. These forecasts underscore the persistent challenges posed by high inflation and energy costs, signaling a cautious economic outlook for the region in the foreseeable future.