2023/06/20 / Erste Group Research |
Economic development should improve The development of the Czech economy remains subdued, mainly due to the drop in household consumption and reduction of inventories. Gradually during the year, the development of GDP should improve, which will be affected mainly by the rapidly weakening inflation. However, a more significant revival of economic activity should occur only next year, due to both domestic and foreign demand. The labor market remains strong. Although we expect an increase in the unemployment rate, it should only be relatively small, which could be seen as a return to NAIRU rather than a cyclical worsening. The Czech National Bank kept interest rates at 7% in May, but the close vote indicated growing concerns about inflationary developments. Since then, however, several anti-inflationary figures have come from the economy, supporting reasons for rate stability during the coming months. Given the expected inflation of around 3% in January, the CNB could start reducing rates in November, which it will continue to do in 2024 and 2025. The koruna remains relatively strong, supported by a high interest rate differential. The koruna could weaken this year. |
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Author | Erste Group Research |
Date | 2023/06/20 |
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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