Inflation to Exceed 12%, Economy to Slow Down, Finance Ministry Predicts

The Ministry of Finance has presented its first economic forecast, having also taken into account the war in Ukraine. It has thus significantly worsened its estimate of the Czech economy’s growth this year to 1.2 percent from 3.1 percent in January.

At the same time, in comparison to the January estimates, the office expects higher average inflation for this year at 12.3 %. So far this year, it has predicted a price rise of 8.5 percent.

Economic growth this year is expected to be driven by government and private sector investment and consumption.

At the same time, however, household consumption will be enfeebled by a significant increase in the cost of living, especially energy prices, and the CNB’s (Czech National Bank) tightening monetary policy.

For next year, the government body expects economic growth to accelerate to 3.6 percent and the average inflation rate to fall to 4.4 percent.

However, the ministry said the estimates are currently very uncertain, mainly because of the impact of the war in Ukraine.

“On the one hand, the influx of refugees from Ukraine could ease labor market deficiency and weaken upward pressure on wages growth, but potentially unsuccessful integration could pose a significant social problem in the future,” the ministry said. Year-on-year inflation is expected to be in double digits for the rest of the year, peaking above 13 percent in the second quarter.”

Annual inflation should approach the CNB’s two percent inflation target only at the end of next year,” the ministry said.

Czech economy grew by 4.8 percent in the first quarter of 2022

The Czech economy grew year-on-year by 4.8 percent during the first quarter of 2022, according to an estimate released by the Czech Statistics Agency. Compared to the previous quarter, GDP grew by 0.9 percent.

The estimate shows that the Czech economy grew slightly more than had originally been forecast by economists as the previous agency forecast lay at 4.6 percent growth in the first quarter.

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