Skip to main content
BlogENNews

MACRO TRENDS AND INFLATION IN THE CZECH REPUBLIC

During the Economic Lunch Briefing Event, organized by the Italian-Czech Chamber of Commerce on the 19th of October 2021, with the presence of renowned economists, were illustrated the main macro- economic trends of the Czech Republic, such as the impact of recent monetary decisions and prospective expectations in an European vision. In particular, the question of accelerating inflation, details on price growth, and the economic and global outlook was raised. Jakub Seidler Chief Economist at ING and Banking Association in the Czech Republic, responsible for macroeconomic analysis and forecasting for the Czech Republic, explained the economic problems present in the Czech Republic, which will be deepened later.

 

MACROECONOMIC OVERVIEW OF THE CZECH REPUBLIC: Post-pandemic risks and accelerating inflation

Currently, there are several economic problems in the Czech Republic, such as inflation, rising electricity prices, and the lack of semiconductors. The post-Covid period still shows a lot of uncertainties, despite the Czech economy accelerating by 8.1% in the second quarter, growth is slightly lower than expected and the Covid level is below 5%. CBA statistics show an acceleration in inflation in recent months from 4.1% to 4.9% in September. Highest percentage since 2008 when it was 7.5%. The prices of services in September were 5.9% compared to 4.9% in August, while the prices of goods raised from 3.6% to 4.4%. The price of electricity in August was -3.4%  while in September -2.3% (+7%  compared to  2020); gas, in September was -4.6% (-0.4% compared to 2020). These numbers refer to the last two months, while a double growth is expected for the next few months. It can be noted that prices are decreasing if we consider the year as a time ace, but comparing the trend of monthly prices we can see a progressive increase.

THE INFLATIONARY PROBLEM

From an inflationary point of view, the different causes are examined. The main one is the increase in energy costs, which will affect all sectors and will not be long in reaching the final consumer. The main problem is that inflation is already high even though energy prices have not yet risen. Within the energy market, companies are adversely affected both because they are subject to the current cost of energy and because some suppliers are exiting the market by reselling available stock at the current price and not at the purchase price. Another cause is the increase in the cost of transport, excise duty on alcohol and tobacco, therefore the direct increase in the price of these products. Finally, the increase in rents, which represents 7% of the consumer price index (CPI), and is due to the increase in real estate prices and the increase in the cost of raw materials used in construction, has a big impact on the general level of inflation.

INCREASE IN THE COST OF ENERGY AND INFLATION: how the Government responds

The government is responding to rising electricity and gas prices. In fact, the Minister of Finance, Alena Schillerová,  has authorized the abolition of VAT (d.p.h.)on energy for the months of  November and December,  currently 21%. (ct24.ceskatelevize.cz -18/10/2021). In addition, families will be paid the fee for renewable resources, with a maximum of 1,500 crowns per year. The Ministry of Finance assumes that the total impact on public budgets will be about two billion crowns per month in the event of a zero VAT rate. For households, about half of the final price of electricity is regulated by the Energy Agency, and mainly includes the transmission and distribution fee and the contribution to renewable energy sources,  and the remaining part of the price is determined by the suppliers themselves; while for gas, the final price regulated by the Energy Agency is less than a third.

Source: https://ct24.ceskatelevize.cz/domaci/3387490-vlada-chce-firmam-odpustit-poplatky-za-obnovitelne-zdroje-v-cene-elektriny

Leave a Reply

Call Now Button