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2024/03/12 / Erste Group Research

Gradual recovery of the economy

This year should see a gradual recovery of the Czech economy, which should return to positive growth after a slight decline last year. However, this will be rather moderate, as the improvements in household consumption will be mitigated by a decline in inventories and weak growth in the German economy. Labor market developments will remain favorable. Although there is a slight rise in the unemployment rate, we see this as a return to the NAIRU, which could ease inflationary pressures in the future. Moreover, real wages will return to positive growth this year.

Inflation fell more than expected and reached 2% in February. Besides the base effect, this was affected by falling energy prices and subdued demand. In line with this, the CNB has started to cut interest rates and will continue to do so this and the next year. On the other hand, inflationary pressures have not completely disappeared from the economy, as evidenced by the persistently strong price growth in services. The weak koruna is becoming another upside risk to inflation. For these reasons, we expect the CNB to remain cautious and, especially in 2H24, to slow down the pace of rate cuts.

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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-