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Economic outlook: 2018: Richer households, stronger koruna

Company: Amcham

Czech economy maintains its strong momentum We have once again revised our growth outlook upwards. The Czech economy is riding the wave of recovery of its main European trading partners and investment activity has been strengthening. Moreover, capital expenditures will be supported by EU fund inflows. 

Labour market tensions to create wage pressures The labour market has hit its limits. Unemployment does not have any room to decrease further and wage pressures are mounting. This will be visible in prices. Inflation is set to stay above 2% on average. 

CNB to keep hiking despite koruna appreciation The central bank still assumes only two hikes for 2018, but the expanding economy and wage pressures will allow the central bankers to move the rates even higher.  

The Czech currency will continue its long-term appreciation trend In 2018, the exchange rate is likely to break through the 25 EUR/CZK and 20 USD/CZK levels.

Government expenditures to boost consumption and investment While the 2018 budget sees a significant increase in operating non-investment expenditures, we assume public investment will also rise materially. The coming year is set to be bearish for Czech government bonds due to CNB policy, strong economic fundamentals and higher EUR yields.


Source: Komercni banka

Tags: Economics | Finance | Business Development |

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