The economy will reach pre-pandemic levels, and inflation will be high

The Czech economy is expected to grow by 3.9 percent next year, up from 2.5 percent. The economy could thus reach pre-pandemic levels next year. At the same time, inflation is expected to rise significantly to 5.5 percent on average, up from an estimated 3.8 percent this year.

Unemployment, on the other hand, will fall slightly. This is based on a regular survey by the Ministry of Finance based on forecasts by 14 domestic expert institutions and estimates by analysts interviewed by the Czech News Agency. According to them, inflation will probably be the biggest problem for the Czech economy next year.

“Inflation will noticeably accelerate in 2022 and will be one of the main macroeconomic issues. Unless, for example, there is an extension of the waiver or a reduction in VAT on energy, we can expect a noticeable acceleration of annual price dynamics of more than eight percent at the beginning of the year. Single-digit inflation will still be a “positive result”,” Jakub Seidler, chief economist of the Czech Banking Association, said. 

He estimates that an important inflation-boosting factor next year will be the rise in electricity and gas prices, which will gradually be reflected in the prices of other goods and services. Inflation is also being boosted by problems in global supply chains, which are pushing up the prices of many manufacturing inputs.

Wage and salary growth are expected to remain above 5% in the coming years, and unemployment is expected to fall further as a result of the economic recovery, which is already among the lowest in the EU.