The Chamber of Commerce expects GDP to stagnate this year, with growth of 2.8 percent next year

President of the Chamber of Commerce Vladimír Dlouhý (pictured on January 6, 2022).

Prague – The Chamber of Commerce expects economic stagnation this year. Next year, the economy should return to growth, with gross domestic product expected to increase by 2.8 percent. Inflation should average ten percent this year, and will slow down to three percent next year. This is stated in the macroeconomic forecast presented today by the president of the Chamber of Commerce, Vladimír Dlouhý.

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“The Czech economy will continue to be under the pressure of relatively high inflation, even if those numbers will decrease in the second half of the year,” said Dlouhý. According to him, the higher comparative base of last year, the halt in the growth of energy prices and the decrease in domestic demand should contribute to the reduction of inflation.

Industrial production will stagnate this year, according to the chamber, and will increase by 2.9 percent next year. For retail sales, the forecast expects a year-on-year decrease of 3.4 percent this year, and growth of two percent next year.

Unemployment should be at the same level of four percent in both years. But Dlouhý pointed out that the development of unemployment will differ according to individual sectors of the economy. “There will be sectors that have enough people and sectors that will still have an unsatisfied demand, especially for skilled labor,” he said.

The Chamber of Commerce expects nominal wages to grow by seven percent this year and next. Due to the development of inflation, however, real wages will fall by 2.8 percent this year, and will increase by 3.7 percent next year. The decline in real wages will be reflected in a decrease in household consumption this year. “Household consumption will decrease in real terms by almost three percent,” said Dlouhý.

The economy will avoid recession this year thanks to the investment activity of companies, said Dlouhý. “It will primarily be investments by companies in changing technologies, when responding to green policy, to the need for energy savings,” he said. According to the forecast, investments should grow by 2.7 percent this year.

In its January forecast, the Ministry of Finance expects GDP to fall by 0.5 percent this year, and inflation will reach 10.4 percent for the entire year. According to the February forecast of the Czech National Bank (ČNB), GDP will fall by 0.3 percent this year, and average inflation will be 10.8 percent. Dlouhý said that the Chamber of Commerce is more optimistic in its outlook for the performance of the economy, because it has more faith in the investment activity of companies.

Next year, the Chamber of Commerce expects a revival of the economy and domestic consumption, as well as a reduction in inflation. “We expect the effects of both the covid period and the war period to be definitively overcome in 2024, if there are no significant external changes. Next year should be a year of solid growth,” Dlouhý concluded.

Macroeconomic forecast of the Economic chambers (data in percent)

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Source: Chamber of Commerce