The Czech Statistical Office artificially lowered inflation, and the government will profit from it, says an economist

Holders of anti-inflationary government bonds will earn less on their investments. This is because inflation reached 15.1 percent in October, which was significantly lower than market expectations.

According to economist Lukáš Kovanda, this was due to a dubious calculation by the Czech Statistical Office (CSO), which played into the government’s hands. He believes the move will save billions of crowns that would otherwise have to be paid out to bond investors. Both the statisticians and the finance ministry rejected the accusations.

“The October inflation in the Czech Republic surprised almost everyone again. This time, however, by how low it is. It showed a year-on-year increase of only 15.1 percent. Analysts had been counting on 17.9 percent at the midpoint of their estimates. The Czech National Bank calculated a value of 17.4 percent,” Kovanda pointed out.

According to him, the difference in the result compared to the estimates is due to the methodology chosen by the statisticians, who included government support for energy in the form of fee waivers for renewable energy sources and the energy saving tariff.

“So, in October, thanks to the introduction of both measures, the price of electricity statistically fell by about 38 percent year-on-year; if it hadn’t been for this, its price would have risen by about 35 percent,” the economist pointed out, adding that without this, overall inflation would have been 18.6 percent.

Huge savings

Holders of the anti-inflationary savings bonds, the Republic Bonds, will thus see interest rates of only around 15 percent instead of about 19 percent, Kovanda said. It is the October figure that is crucial for the yield on the bonds. In last year’s issue, offered between September and December, the government sold CZK 41.1 billion in bonds worth.

“This means the state will save roughly CZK 1.6 billion in interest on this issue alone this year. However, it will save billions of dollars because artificially low inflation will gradually lower the interest rate on the Republic’s bonds from other issues,” the economist says.

However, the CSO and the Finance Ministry rejected his words about artificially lowering inflation. “In October, the price of electricity for households was lower because they will pay less for it due to the remission of charges and the introduction of an energy-saving tariff,” CSO spokesman Jan Cieslar told Právo on Thursday. According to him, the energy measures are reflected in the statistics of all EU countries.

“We consider any speculation about the government influencing the work of the Czech Statistical Office to be absurd,” Finance Ministry spokesman Tomáš Weiss said.