Economic policy / Macroeconomic Indicators, Economic Growth
This section reports on economic policy initiatives of the Czech government, the EU, and other entities that have a direct impact on the competitiveness of the country. It also includes information on economic priorities of the AmCham and other leading associations.
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Inflation is hampered by cheaper food, with core inflation remaining high
Due to a fall in food prices, inflation slowed down more than expected. Core inflation remains elevated. We still expect inflationary pressures will ease due to weakened demand. At the beginning of the year, inflation should be below 2%. Inflation is below market and CNB expectations, and speculation on future rate hikes is declining.
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Czech National Bank: The vaccine game changer
The CNB will stay on hold this week but should confirm a more optimistic outlook for next year, driven by the vaccine news and recent fiscal package approval. This will push GDP and inflation higher and raise the odds of earlier rate hikes. But prudent wording might be chosen to prevent a sharp CZK appreciation. We look for two hikes in 2H21
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Industry and exports are expanding despite the second wave of the pandemic
Although manufacturing slowed down in October, it has still been growing decently in the second pandemic wave, with strong support from foreign demand. November will probably be weaker but not dramatically. Consequently, foreign demand significantly boosted exports while imports remained weaker. Construction declined at the beginning of the fourth quarter.
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