Prague, Berlin - Angela Merkel's decisive election victory last weekend means that the German economy will maintain its growth that started in the second quarter (0.7 percent).
The outcome and economic implications of Germany's election are extremely important also for the Czech Republic, whose economy is highly dependent on its big neighbor. One in three exporters in the Czech Republic sell goods to Germany.
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The problem is that German demand is probably not set to grow soon. German household demand will stay at the same level at least until the second half of 2014, warned CSOB bank economist Jan Bures. German household consumption amounts to 58 percent of GDP.
"There is little hope that consumption will increase and compensate for decreasing demand in peripheral economies," said Bures.
The situation will be more favorable for Czech companies that serve as suppliers to German exporters, because Germany is a very export-oriented economy. According to World Bank data, exports amount to 52 percent of German GDP, compared to 14 percent in the USA and 31 percent in China, which is considered an export superpower.
Germany's net exports amount to only 6.6 percent of GDP though, according to the German Federal Statistical Office, because the country's imports amount to approximately 46 percent of GDP.
However, it can be expected that German politicians will focus above all on stimulating household consumption, rather than exports.
"Unlike the Czech economy, Germany relies also on strong internal demand, which is why the country has avoided recession," said Raiffeisenbank analyst Vaclav Franc.
Czech exporters to Germany, regardless whether they sell to households or companies, will also face another problem. "The Czech Republic is not the only country that wants to get into the German market and cut a slice of its enormous demand. That's why it will face strong competition from other EU countries," said Home Credit analyst Michal Kozuba.
Czech exports amount to 78 percent of the country's GDP.
Czech analysts also agree that the German elections will not produce any dramatic turn in how the euro crisis is being handled.
