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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3Q economic growth of 1.5% qoq fostered by household consumption
The second reading of Czech GDP for 3Q has brought a slight upward revision. The figure was increased to 1.5% qoq from the previous estimate of 1.4%. The qoq rate of growth was thus similar to 2Q’s 1.3% qoq. Given the problems faced by industry, we consider this a very good result. Due to a higher base effect, yoy GDP growth slowed from 8.5% to 3.1%, as 3Q20 was already marked by a partial economic recovery. Economic activity is still about 2.5% below the pre-crisis 2019 level.
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Inflation will hit 6% and the CNB will soon raise interest rates above 3%
In October, inflation rose again above the expectations of most analysts and the Czech National Bank. The main driver is the cost of housing. Year-on-year core inflation rose above 6%. In December, we expect the CNB's repo rate to increase to 3.25%.
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Inflation accelerates; CNB will raise interest rates again
At its November meeting, the CNB will continue to raise interest rates. We expect them to increase by 50bp, but the risk is higher growth. The tightening of monetary policy is justified by the development of inflation, which we expect to get closer to 6% in October. Industrial production and retail sales should show minor growth in September.
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