Real GDP is forecast to grow by 2.3% in 2022 and 2.0% in 2023, somewhat less than in 2021, when the economy expanded by 3.5%. This lower growth results from exacerbated supply chain disruptions following the Russian invasion of Ukraine and China’s zero-COVID policy, as well as the elevated global inflation rate and the tightening of monetary policy.
Last update : Summer 2022 Economic Forecast (14/07/2022)
|GDP growth (%, yoy)||-5,5||3,5||2,3||2,0|
|Inflation (%, yoy)||3,3||3,3||13,9||5,8|
The Czech economy started 2022 on a strong footing, with 0.9% q-o-q growth in the first quarter, fuelled by an increase in investment and a positive contribution of net exports. However, in the second quarter of 2022, the economy is forecast to contract, as the negative economic effects of the Russian invasion of Ukraine are expected to fully mature. Over the remainder of 2022, economic growth is projected to stagnate as increases in the cost of finance and reduced real income continue to drag on economic activity. In 2023, the macroeconomic situation is expected to improve but growth will remain below its historical average. Output is forecast to surpass its pre-pandemic level in the second quarter of 2023.
Compared to the Spring Forecast, real GDP growth is revised upward for 2022 to reflect the strong first quarter in which supply chain bottlenecks affected Czechia’s industrial economy less than anticipated. Output growth for 2023 is revised downward, consistent with the deteriorated global macroeconomic outlook.
Inflation has been increasing since the start of the post-pandemic recovery. The supply chain disruptions caused by Russia’s war of aggression against Ukraine add to these inflationary pressures, affecting besides the prices of energy and other production inputs, the prices of agricultural products. The Czech economy will therefore be subject to exceptionally high and broad-based inflation over 2022, and is set to experience second-round effects on for instance wages, which contribute to the height and persistence of inflation.
Inflation is expected to peak in the third quarter of 2022, when HICP growth is forecast to increase to 16% y-o-y. Inflation is foreseen to decline afterwards, when the impact of the loss of real income and the effectiveness of tightened monetary policy are expected to prevail.
Inflation as measured by HICP is forecast to average 13.9% over 2022 and 5.8% over 2023. This upward revision compared to the Spring Forecast is due to higher than expected inflation in the first half of 2022. Headline- and core inflation are forecast to converge in the first half of 2023.