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2023/03/09 / Erste Group Research

Economic development to strengthen next year

In quarterly terms, GDP fell in the third and fourth quarters of 2022, and we also expect a further decline in the first quarter of this year. Thus, the Czech economy is going through a mild recession, which is, however, significantly shallower than the original estimates. The main reason for the generally subdued GDP development is household consumption, which is affected by strong inflation and negative sentiment. Although the development of the labor market has worsened, mainly due to the drop in real wages, unemployment remains below 3% without significant signs of a future increase.

Economic development could start to improve in the second half of the year and strengthen next year, mainly due to a recovery in foreign trade and investments. Inflation will gradually weaken from February, when, in addition to the base effect, it will be driven by subdued household consumption, a drop in energy prices and a strong koruna. With inflation expected to be close to the target even in 1H24, the CNB could start cutting rates in 3Q23. The koruna remains strong when it is primarily influenced by market sentiment. However, we expect a slight weakening of it in the coming months.

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General information

AuthorErste Group Research
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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