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2022/06/14 / Erste Group Research

Economic developments will improve next year

This year, the development of the Czech economy will probably be better than originally expected, partly because of a relatively high GDP growth in 1Q22. However, economic developments will worsen from the second quarter, as negative impacts of the war in Ukraine, problems in global supply chains and high inflation will temporarily subdue demand in the economy and worsen development in the labor market. The recovery should take place next year, which will also be supported by a gradual reduction in inflation. However, this will depend on global developments.

Due to the high inflation, the CNB is likely to raise rates again in June, but we expect them to remain stable thereafter. The first cut could occur in November, mainly due to slowing inflation and intensifying anti-inflationary pressures stemming from lower household consumption. The koruna remains weak, as it is negatively affected by sentiment in the world economy. It could gradually strengthen over the next two years, which will be mitigated by the effects of declining CNB rates. We still perceive the risks as high and skewed towards worse macroeconomic developments.


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General information

AuthorErste Group Research
Date2022/06/14
Languageen
Product nameCEE Country Macro Outlook
Topic in focusFX, Macro/ Fixed income
Economy in focusCzech Republic
Currency in focusCzech Koruna
Sector in focus-
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