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2019/12/05 / Erste Group Research

Czechia Outlook | GDP growth to persist slightly below 3%


The favorable economic development in the Czech Republic continues. We expect GDP growth to arrive at 2.5% and 2.7% in 2020 and 2021, respectively. Similarly to this year, the growth will still be driven by both domestic and foreign demand. The former is mainly influenced by tight labor market whereas the latter by the increasing quality of exports and the weak koruna.

The strong labor market and domestic demand are the most significant proinflationary forces behind the high inflation. However, as risks in the global economy prevail, we see stability of CNB rates in the next year as the most likely scenario. The koruna is still weak, as the link between the koruna and the interest rate differential is much weaker compared with previous years, due to uncertainty in the world economy.

In 2H19, the CNB has been in a wait-and-see mode. Although the domestic economy is still highly pro-inflationary, this development is mitigated by the anti-inflationary development in the Eurozone. Moreover, economic risks are still sufficiently high from the CNB’s point of view, which in turn results in higher cautiousness. In the next year, we see stability of rates as the most likely outcome.


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General information

AuthorErste Group Research
Date2019/12/05
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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