Survey: Czech economy expected to grow faster in 2022, but so will inflation

The growth of the Czech economy should speed up next year, rising from this year’s 2.5 percent to 3.9 percent in 2022, based on the latest regular Finance Ministry survey published on Sunday. However, inflation is also expected to grow from this year’s expected 3.8 percent to 5.5 percent.

The survey is based on the prognoses of 14 of the country’s leading expert institutions. These agree that the main economic challenge for the Czech Republic next year will most likely be growing inflation.

The chief economist of the Czech Banking Association, Jakub Seidler, told the Czech News Agency that the rise in inflation will visibly speed up next year and that, unless moves are made to prolong remissions or reduce state VAT on energy costs, any year-on-year inflation rate that keeps within single digits will be seen as a positive result at the beginning of 2022. He believes that January data will provide the best indication of how high inflation will actually be next year. He warns that the rise in costs could be as high as in 1998, when inflation exceeded 10 percent.

Predictions suggest that an important factor in the rise of inflation will be the growing prices of electricity and natural gas, which will gradually also start affecting the prices of other goods and services. Global supply chain problems are also predicted to have an effect. Meanwhile, the expected rise in the strength of the Czech crown on the currency market could have a slight slowing down effect on inflation, according to experts.

Despite next year’s worrying predictions, economists expect that in 2023 and 2024 inflation should fall back down to 2 percent.

Current predictions also suggest that salaries will continue to grow at a rate above 5 percent in the next several years. Unemployment is expected to fall further due to the economic recovery.

The Ministry’s survey results were followed on Monday by the release of the monthly business cycle survey of the Czech Statistics Agency showed that trust in the Czech economy rose by 0.3 points to 95.5. Compared with last year’s data this shows an increase in both the overall economic sentiment indicator, as well as in confidence among both consumers and entrepreneurs.