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2020/03/18 / Erste Group Research

GDP to decrease this year

For this year, we expect GDP growth to arrive at -0.5%. Although the first two months of this year were favorable, the situation around the coronavirus will significantly affect the development of real economic activity in March and during 2Q. From 3Q onwards, we expect a gradual recovery of economic activity, which should continue in 2021. Subdued economic activity this year will affect the labor market, implying a rise in unemployment and lower wage growth.

Monetary conditions have loosened significantly, as the CNB cut rates by 50 basis points and the koruna weakened significantly. Although inflation is now almost 4%, we expect it to slow down during 2H20 and at the beginning of 2021. This fact, influenced by subdued economic activity, should imply another cut of CNB rates. The koruna will stay weak in the coming weeks, but we expect it to start gradually appreciating from 3Q on.


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General information

AuthorErste Group Research
Date2020/03/18
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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