Research Detail
| 2022/03/10 / Erste Group Research |
Risk of stagflation this year Although the medium-term outlook remains favorable, the Czech economy may fall into stagflation this year, with very low GDP growth and high inflation. Next year, however, there would be a recovery, with relatively strong growth of the economy and a rapid easing of inflationary pressures. The labor market will deteriorate this year, mainly due to the decline in real wages. Although the unemployment rate could slightly increase, we expect it to stay below its equilibrium level. The CNB meeting is scheduled at the end of March and the CNB will be in a difficult situation, with high inflation and low expected GDP growth. Compared to a part of the market, we remain less optimistic, as we now see approx. 50% probability of a hike. Overall, we very slightly favor stability of rates. However, due to the high inflation, we do not expect the first rate cut until the beginning of 2023. The koruna will remain at weaker levels, but it will gradually return to a strengthening tendency. |
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General information
| Author | Erste Group Research |
| Date | 2022/03/10 |
| Language |  |
| Product name | CEE Country Macro Outlook |
| Topic in focus | FX, Macro/ Fixed income |
| Economy in focus | Czech Republic |
| Currency in focus | Czech Koruna |
| Sector in focus | - |
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