Kovanda: The Czech economy will land smoothly


The Czech Republic could manage the coveted “soft landing”, say the latest figures on confidence in the economy.

Consumers in the Czech Republic are quickly regaining confidence in the economy. In April, their mood in this direction is better than the long-term average from 2003 to 2023, while Czech consumers have a better mood than the long-term average for the first time in the entire period from autumn 2021.

The key reason for consumer optimism is the drop in inflation to the level of the Czech National Bank’s target, i.e. the stabilization of price developments in the Czech Republic, and the related drop in food and energy prices. All this while the unemployment rate remains at the lowest level in the EU. Considering that the domestic economy as a whole should show moderate growth this year, it can be stated that the Czech Republic is slowly but surely completing the desired “soft landing” maneuver. At the same time, it is historically rare. Taming inflation will usually require a deeper recession and a more noticeable rise in the unemployment rate, i.e. a “hard landing”.

Stanislav Šulc: CNB cautious? The scarecrow of inflation may return very soon


The governor of the Czech National Bank admitted that rate cuts may continue. We could soon get close to the 5 percent mark. But then, according to the governor’s words, the CNB will become more vigilant. And no wonder. The fight against inflation is far from won. Although it may not seem so at first glance.

Stanislav Sulc

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However, despite the significant improvement in consumer sentiment, the aggregate indicator of confidence in the economy remains at a long-term below-average level, where it is dragged down by the long-term below-average sentiment of entrepreneurs. However, the mood of entrepreneurs, or the corporate sphere improved compared to March.

Risks remain

Entrepreneurs are burdened by the fact that this year’s economic growth in the Czech Republic is still expected to be relatively weak. They are still dealing with relatively high interest rates and the effects of the sluggish performance of the German economy. Even so, the mood of entrepreneurs is now the best in April for the past year. Especially due to the prospect of further interest rate cuts as well as an improvement in the state of the German economy. The mood of entrepreneurs in services has noticeably improved. At the same time, relatively significant inflationary pressures persist in services. However, the improvement in the mood of consumers is so significant that, despite the increased prices of services, they show a growing demand for them, as evidenced by the improving mood of entrepreneurs in services, which is the best since July 2022.

The continued favorable development of food and energy prices and the further decline in interest rates should in the coming months of this year fundamentally contribute to increasing the overall indicator of overall confidence in the economy to a positive zone, i.e. to a zone that corresponds to a long-term above-average level.

Read more comments by economist Lukáš Kovanda here

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“Having a place” that guarantees you financial independence, freedom, a beautiful life and God knows what else is a chimera. And nothing changes the fact that someone has calculated the so-called decent wage, the monthly receipt of which is “enough” for you to fulfill certain ideas. This is also why living wage is a completely wrong concept that does more mischief than good in society.

Stanislav Sulc

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The article is in Czech

Tags: Kovanda Czech economy land smoothly


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