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2021/09/09 / Erste Group Research

GDP growth to accelerate in the next year

The development of the Czech economy remains favorable, with sound domestic and foreign demand. Although GDP growth could only slightly exceed 3% this year, this figure is affected by unexpectedly low 2Q21 growth, which will probably be revised upwards in the future, in our view, and by problems with supply chains. The labor market has been tightening, while the unemployment rate reached 2.8% in July and is expected to decrease further. This story will not change much in the next two years, when the economy will be also supported by EU funds.

Due to the tight labor market and sound domestic demand, inflation is staying above the upper bound of the tolerance band around the inflation target. Thus, the CNB has started gradual policy tightening and will keep hiking in the coming years, as pro-inflationary pressures from the domestic economy will remain relatively strong. We expect the koruna to gradually appreciate, although its movement this year will be rather smaller. The main risk still stems from the pandemic, although we do not expect strong restrictive measures within our baseline scenario.


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General information

AuthorErste Group Research
Date2021/09/09
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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