The balance of public finances is calculated from the difference between income and expenditure of ministries and other state authorities, cities and municipalities, selected contributory organizations, state and other non-budgetary funds and companies, public universities, public research institutes, health insurance companies, associations and unions of health insurance companies and the Center interstate payments.
At the same time, the central bank lowered its estimate of total government sector debt this year to 45 percent of GDP from the 44.1 percent of GDP it expected in August. Last year, debt was 44.2 percent of GDP. Next year, according to the CNB’s forecast, debt will increase to 45.4 percent of GDP, and the following year it will decrease by one percentage point.
The CNB prediction also states that nominal wage growth will accelerate to 7.5 percent this year from 5.3 percent last year. In real terms, however, wages will fall by 2.8 percent, as nominal growth will not outpace inflation.
Michl: Any reduction in interest rates will be gradual at first
It will be the second drop in a row after last year’s drop in real wages by 8.4 percent. Wages will return to real growth next year, when they should increase by four percent. In nominal terms, they will grow by 6.7 percent.
“Nominal wage growth this year remains brisk in an environment of still high year-on-year inflation. The forecast expects increased, but gradually moderating wage growth in the following years as well. However, this will not affect the achievement of the inflation target, as the currently increased profit margins of companies will be corrected at the same time. In this way, the growth of the real purchasing power of wages will gradually be restored, which will support household consumption,” stated the CNB in the opening chapter of the report on monetary policy.
According to the forecast, unemployment will increase slightly, but the situation on the labor market remains tense. According to the methodology of the Labor Office of the Czech Republic, the share of the unemployed should increase to 3.6 percent this year from last year’s 3.4 percent, according to the CNB. In the next year, the share of the unemployed should increase to 4.1 percent, in 2025 it should reach 4.2 percent.