The CNB has worsened its economic growth estimate for this year and improved it for next year

Updates: 06.05.2021 16:01

Prague – In the new forecast, the Czech National Bank has worsened its estimate of economic development this year, while improving its estimate for next year. Newly, it expects economic growth of 1.2 percent this year and growth of 4.3 percent next year. At a press conference after the meeting of the Bank Board, the Governor of the CNB, Jiří Rusnok, informed about it. In the previous February forecast, the CNB expected growth of 2.2 percent this year and growth of 3.8 percent in 2022. As expected, the CNB Board left interest rates unchanged.

Rusnok also said that the stability of market interest rates was consistent with the new forecast, followed by their rise from about the middle of this year.

The Council today left interest rates unanimous unchanged. The basic interest rate, on which the interest rate on commercial loans is derived, thus remains at 0.25 percent.

According to the CNB, headline inflation should be 2.7 percent this year and 2.4 percent next year. In the previous February forecast, the central bank estimated average inflation at two percent this year and 2.2 percent next year.

At the same time, in new estimates, the central bank expects a slightly stronger koruna exchange rate this year. The average exchange rate of CZK 25.70 / EUR is expected this year. In February, it estimated 25.80 crowns per euro for this year. In 2022, according to new estimates, the koruna should strengthen further to an average of CZK 25.10 / EUR. However, the central bank’s February estimates calculated an even stronger koruna at CZK / EUR 24.90.

In the April forecast, the Ministry of Finance left the estimate for this year’s economic growth at 3.1 percent. For next year, he estimates that the economic growth rate will accelerate to 3.7 percent, mainly due to the recovery in private consumption. The International Monetary Fund expects the Czech economy to grow by 4.2 percent this year. The European Commission expects 3.2 percent growth.

As expected, the CNB Board left interest rates unchanged today

As expected, the Bank Board of the Czech National Bank left interest rates unchanged. The basic interest rate, on which the interest rate on commercial loans is derived, thus remains at 0.25 percent. Central Bank spokeswoman Markéta Fišerová informed about it. Economists expect the rate change only later in the second half of the year, referring to Governor Rusnok’s earlier statement that the council will start a debate on rate change after the August meeting.

At its last monetary meeting on March 24, the council unanimously left interest rates unchanged. The Council last changed rates last May 7, when it reduced the key interest rate by 0.75 percentage point to 0.25 percent. Earlier, the council cut interest rates twice in March. The aim was to mitigate the economic impact of the spread of coronavirus.

“The decision on rate stability is not surprising. We expect the central bank to raise rates by the end of the year. The Czech economy will rise only slowly from the last year of its life with covid,” said PwC partner and currency risk management expert Olga Cilečková . According to her, this is also confirmed by a PwC survey among CEOs of Czech companies, according to which more than half of them do not believe in the recovery of the Czech economy this year.

“The main reason for the continued stability of interest rates remains uncertainty about the further development of the pandemic and the economy. The still low share of the vaccinated population does not rule out another pandemic wave. to reduce state support, “said Komerční banka economist Martin Gürtler. He added that a premature increase in rates could jeopardize the economic recovery. Gürtler expects the first rate hike in November.

Interest on bank deposits and loans is derived from central bank rates. Businesses have higher interest rates on investment and operating loans, and more expensive housing loans on households.

All seven members attended the Bank Board meeting.

Source: České noviny – hlavní události by

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