PwC Survey: Most Czech company bosses expect inflation to remain at over 5 percent in 2022
Three-quarters of Czech companies raised prices last year, according to the results of the newly released annual PwC CEO Survey which collected responses from 185 company managers in the Czech Republic. Bosses expect the rise in prices to continue in 2022.
The second half of last year saw a major rise in year-on-year inflation in the Czech Republic. However, only 25 percent of companies in the PwC questionnaire stated that they raised their prices by 5 to 10 percent, a rate equivalent to the real inflation rate that exceeded 6 percent towards the end of last year. Meanwhile, 23 percent of companies reported that they did not adjust their prices at all and 2 percent said that they lowered them.
According to Petr Kříž, a partner at PwC, Czech company CEOs were already reporting about the dangers of rising inflation during the spring of last year, but very few predicted that the rise in costs would end up being so high. Echoing the predictions of several economists, he said that he does not expect inflation to disappear at least for the period running into the first half of 2022.
“Czech companies faced several post-Covid effects last year. These included the rise in prices of imported raw materials, labour shortages and a major increase in energy and fuel costs that was noticeable during the autumn. The government also injected CZK 420 billion more into the economy than was expected. This was all going to get reflected in the cost of commodities and services.”
The results of the survey support this analysis. 58 percent of the CEOs that were questioned by PwC said that they expect inflation to remain above 5 percent in 2022. Meanwhile, 30 percent believe that inflation will range between 4-5 percent and only 11 percent of respondents said that they see inflation falling to 3-4 percent. None of the CEOs believe that the Czech National Bank’s (CNB) target of curbing inflation back below 2 percent is realistic.
The CNB has been fighting inflation by rapidly raising interest rates, increasing them by 3.5 percent last year to the current rate of 3.75 percent. Petr Kříž expects this policy to continue in 2022, but believes that its effects will only become visible during the second half of the year.
CEO respondents in the survey stated that inflation is one of the main hurdles for further expansion of their companies, 42 percent of respondents especially noted the rise in prices of raw materials. For 20 percent it was the rise in energy prices. Only 6 percent stated that the Czech National Bank’s higher interest rates and the associated rise in loan repayments is a key issue for them.