Czech Banks Forecast Stronger Economic Growth

Czech banks have boosted their forecast for the nation’s economic growth this year. The Czech Banking Association (CBA) has recently revised its expectations for the country’s economic growth rate from 1.2 to 1.4 percent for the current year. The CBA also predicts a 2.7 percent increase in the next year’s Gross Domestic Product (GDP).

Inflation is another key economic indicator that the CBA has considered. Their forecasts suggest that inflation will fall to 2.3 percent this year and remain similar for the following year. This is a notable decrease from the CBA’s February estimate, which predicted an average inflation rate of 2.7 percent for the year.

Supporting these projections, the Czech National Bank’s (CNB) current forecast also aligns with an economic growth of 1.4 percent for this year. The recent shift in international developments towards a slightly more optimistic direction has cautiously improved the outlook for foreign demand and has allowed for an improvement in domestic economic growth, as stated by CBA analyst Jakub Seidler.

However, the Czech economy’s growth remains fragile, particularly due to developments in Germany and China. The main driver is expected to be domestic demand. Household consumption, which has seen a decrease in the past two years, is expected to start growing again this year, with an increase of 2.5 percent. After a two-year slump, the CBA expects a nearly four percent increase in real wages.

Regarding monetary policy, the Banking Association anticipates that the Czech National Bank will continue to reduce rates this year. By the end of the year, the main rate – the basis for mortgage interest rates or savings accounts – will drop to four percent from the current 5.25 percent.

In conclusion, the CBA has slightly revised its new forecast for the Czech koruna towards weaker values. This year’s average value of the Czech currency should remain above the threshold of 25 CZK per euro. At the end of the year, the CBA anticipates a rate of around 24.8 CZK per euro.