Czech GDP to grow by 3 pct this year - FinMin's survey

The Czech economy will grow by 3 percent this year and by 3.9 percent next year, according to the Finance Ministry's regular survey of macroeconomic forecasts issued by 16 domestic institutions. In 2023-2024, Czech GDP should slow down to about 3 percent.

"The first half of this year continued to be affected by the coronavirus pandemic and related restrictions. The economic activity should nevertheless start reviving in the course of the year thanks to the improvement of the epidemiological situation and relaxation of restrictions," the ministry said.

Last year, the Czech economy shrank by 5.6 percent due to the impacts of the pandemic. Inflation is expected to rise to 2.6 percent on average this year but to slow down to 2.2 percent next year, according to the survey. Last year's average inflation rate reached 3.2 percent.

A contribution to the currently low growth of prices comes from by weak domestic demand, which should later be joined by gradual strengthening of the crown. On the other hand, rising crude oil prices are acting in the opposite direction. A revival of private consumption next year will contribute to higher price rise, too.

"The monetary policy will respond to the expected inflation development by gradual hiking of interest rates," the ministry said. The crown is expected to firm to Kc25.3/EUR on average next year and to Kc24.30/EUR in 2024, according to the survey. The institutions surveyed also expect wages and salaries to grow by 3.2 percent this year and by 4.5 percent next year.

"In this indicator, which is very important for the budget, the Finance Ministry's is very conservative in comparison with the other institutions' forecasts. The ministry expects the lowest wage and salary growth. The same applies to the years 2023 and 2024, the ministry said. The ministry expects wages and salaries to rise by 0.7 percent this year and by 2.3 percent next year.

The ministry's survey was based on the forecasts provided by the Finance Ministry, Industry and Trade Ministry, Labour and Social Affairs Ministry, Czech National Bank (CNB), Akcenta CZ, Citibank, Ceska sporitelna, CSOB, Deloitte Czech Republic, Generali Investments CEE, Chamber of Commerce, Institute of Economic Studies at Charles University's Faculty of Social Sciences, Komercni banka, Raiffeisenbank, Confederation of Industry of the Czech Republic, and UniCredit Bank. The survey additionally included the European Commission's (EC) May forecast and the International Monetary Fund's (IMF) April forecast.

The Finance Ministry said in its April forecast it expected GDP to grow by 3.1 percent this year and by 3.7 percent next year. The Czech Banking Association expects this year's growth at 3.3 percent and next year's growth at 4.3 percent. The CNB said in May it envisaged a rise of 1.2 percent for this year and a rise of 4.3 percent for next year. The IMF expects Czech GDP to grow by 4.3 percent this year and the EC expects a 3.2 percent rise.

"The basis tendencies of development in 2021-2022 which the Finance Ministry envisages in its latest macroeconomic prediction (April 2021) are consistent with the forecast of other institutions on the qualitative level, " the ministry said.

Source: ČTK