Czechia: Gradual economic recovery

Erste Bank Research Team Erste Bank

GDP growth to accelerate next year. CNB to cut rates cautiously. Yield curve has remained stable. Koruna has slightly strengthened.

The Czech economy has emerged from stagnation and is slowly growing. Growth is currently being propelled primarily by a resurgence in household demand, which is expected to be complemented by foreign demand and private investment next year. Czech GDP has recently been revised significantly upwards, suggesting that the economy has outperformed initial expectations in recent years. The labor market remains robust, with real wages resuming growth this year, thereby fueling consumption. Although the unemployment rate has edged up slightly, it remains below the NAIRU.

Inflation is currently near the target, but is anticipated to rise in the coming months. Inflation is driven by robust price growth in the services sector, wage growth, and expansionary fiscal policy. These factors are expected to persist into next year, leading us to anticipate that the Czech National Bank will continue to cut rates cautiously. The koruna has recently adjusted back towards the EUR/CZK 25.0 level, aligning broadly with macroeconomic fundamentals. Consequently, we do not foresee significant further appreciation, although a slight movement by year-end cannot be ruled out.

GDP (real,y/y)

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Erste Bank Research Team

Erste Bank

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