Employers expect stagnation next year

The Czech economy will stagnate next year. Although inflation will gradually decline, it will remain high. This is based on estimates provided by employers’ associations. According to them, domestic enterprises will react with austerity measures such as reduced investment, but they do not expect significant layoffs yet.

“The economy will gradually slow down. The trend is evident from a range of data, from the outlook for freight transport orders to business-to-business surveys to expectations of stagnating growth in the euro area. We see demand cooling. ” As a result, we expect growth to slow further to 0.9 percent or lower in 2023,” said Bohuslav Čížek, director of the Confederation of Industry and Transport’s economic policy section. The important thing, he said, will be whether all measures on energy prices for companies can be completed.

The Chamber of Commerce expects economic performance to stagnate next year. “Next year, the economy will stagnate, and industry, which is usually its driving force, will stop. Although price growth will slow down during the next year, relatively high inflation will characterize the whole of 2023,” said Miroslav Diro, the chamber’s spokesman. According to him, the stability of energy supplies and a functional system of price ceilings are prerequisites for the forecast.

High growth in electricity and gas prices leads to increased growth in companies’ costs and households’ spending, despite the government measures in place, because the effect of the caps effective from January 2023 is still only partial, Diro pointed out. He said that the time lag in implementing the measures is particularly detrimental to businesses. He added that restrictions imposed by European regulations limit the effect of the government measures, so the measures being taken may mitigate inflation but not return prices to last summer’s levels.

“Companies will continue to struggle mainly with the rise in the price of all inputs on the one hand and the inability to reflect these costs fully in prices for customers. If they do so, they will lose competitiveness. Purchasing power is constantly declining due to record inflation,” said Eva Svobodová, Director General of the Association of Small and Medium-sized Enterprises.

She said she could not rule out that austerity measures in companies will continue or gain momentum. In her opinion, some small and medium-sized enterprises have already had to resort to them. So far, these have mostly been investment restrictions or staffing measures, for example, when the positions of retiring employees were not filled, she noted.

“Closing down a company is the last thing, but we already have signs that many entrepreneurs, especially in small towns and villages, will have to resort to it sooner or later,” Svobodová warned.