Economic policy / Macroeconomic Indicators, Economic Growth
This section reports on economic policy initiatives of the Czech government, the EU, and other entities that have a direct impact on the competitiveness of the country. It also includes information on economic priorities of the AmCham and other leading associations.
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Spotlight issue
What's in the tails? Why the coming recession will be worse than expected
In the latest edition of “What’s in the tails?” Deutsche Bank Research economists David Folkerts-Landau, Peter Hooper and Jim Reid discuss how Fed Funds and the ECB rate may have to go higher than the consensus believes and that, as a consequence, the upcoming recession could be more severe than even sceptics believe.
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Consuming stagflationary shock
The war in Ukraine has affected the global economic outlook. The fears of potential disruption to Russian energy imports have pushed commodity prices up, which is likely to further exacerbate the already severe inflationary pressures. A shortage of Russian energy would also lower GDP growth, especially in highly dependent Europe. Moreover, the war is likely to hinder the expected easing of supply-chain issues. Given this, we have decided to revise our forecasts for Czech key macro and financial variables ahead of the regular quarterly update. We have increased our inflation forecast from 8.8% to 11.5% for this year. In addition, we have lowered our estimate for GDP growth from 4.9% to 3.1%. In our view, the CNB is likely to continue raising interest rates. Previously, we had expected rates to reach a peak of 5%, but now we see them peaking at 5.5%. Bringing interest rates back to policy-neutral level is likely to be postponed until next year.
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