Czech economic growth is expected to accelerate to 4.5 percent this year,
as compared to 2.5 percent in 2016, according to the Czech Chamber of
Commerce. Next year the chamber predicts a slow-down of the GDP to 3.6
percent. This year’s eeconomic growth is driven by demand on foreign
markets and consumer spending.
In its latest forecast the Czech National Bank also upgraded its growth forecast for this year to 4.5 percent, up from the predicted 3.6 in August.
The Czech National Bank’s move Thursday to raise its key two week repo rates by 0.25 percentage points to 0.5 percent was hardly a surprise and the Czech crown strengthened little as a result. Previous evidence had shown that central bank members had already been on the verge of raising rates at the previous session.
The Czech National Bank hiked interest rates on Thursday by 0.25 percentage
points to bring the basic rate to 0.5 percent.
It’s the second rate hike this year following a previous one in August. That was the first rate increase since 2008.
The latest move had been widely predicted by economists. There are also expectations that the bank could follow up with a further rate rise this year and at the start of 2018 faced with a booming domestic economy.
The Czech National Bank is set to discuss interest rates on Thursday, with
most economists expecting its board to an announce an increase, the Czech
News Agency reported. Experts say that the central bank is most likely to
raise interest rates by 0.25 of a percentage point, but they have not ruled
out a rise of double that amount.
The CNB increased interest rates for the first time in eight years in August.
The bank will also issue a macroeconomic prognosis on Thursday and economists expect it to revise previous estimates for GDP growth and inflation upwards.
The Czech power utility ČEZ is selling its coal-fired power plant in Varna
to the Bulgarian company SIGDA OOD. ČEZ was forced to halt operations at
the plant in 2015 after it failed to bring it up to EU environmental rules.
ČEZ said it had been denied an exemption by the European Commission and
the plant could not continue to work without an environmental upgrade. With
a generating capacity of 1,260 megawatt, the plant serves as a back-up to
the national power grid and the Bulgarian authorities have stressed the
importance of keeping it in operation, pointing out it could become a much
needed source of energy if Bulgaria were to be hit by a gas crisis.
ČEZ wants to leave the Bulgarian market due to drawn-out problems with the local authorities. It is to decide about the sale of all its Bulgarian assets, which include two renewable energy plants and an electricity trader, by the end of this year.
One of the important issues discussed at the two-day EU summit in Brussels was proposed changes in the mechanism of EU decision-making, which would allow some EU members to push ahead with integration faster. For the Czech Republic, which is still outside the Eurozone, this could present a serious problem.
The Czech crown this week reached its strongest level to the euro since before the Czech Central Bank launched its intervention regime in 2013, when it climbed to on Wednesday. I discussed the current development – and the future outlook for the crown – with Patria Finance’s chief economist, Jan Bureš.