Revival of the Economy in Czechia

The Czech economy is seeing a strong recovery, driven by household consumption and the potential for increased foreign demand in the future. This growth could lead to GDP increasing to around 3% in the coming years. The labor market remains positive, with low unemployment and expected growth in real wages, which will further stimulate economic demand.

Inflation has increased in the second quarter, largely due to increased consumer spending. However, inflation has stayed within the acceptable range around the target inflation rate. There may be a temporary increase in inflation by the end of the year, potentially exceeding 3%. The CNB is expected to continue with gradual rate cuts, likely in 25-point increments. Uncertainty remains around how the CNB will respond to inflation spikes in the fourth quarter of 2024, which could impact the pace of rate cuts.

Despite a significant appreciation, the Czech koruna is expected to remain stable, with year-end levels similar to the current value. This stability in the currency will contribute to overall economic growth and stability. To download the full Czechia Outlook, follow the link provided.