CNB’s forecast presented by Petr Král

CNB's Forecast

(Monetary Policy Report Summer 2021)

Erste CEE Investor Roadshow

21 September 2021

Petr Král (Executive Director, Monetary Department)

Presentation Outline

1. Assumptions of the Forecast
2. The Macroeconomic Forecast
3. Monetary Policy Simulations, Decision and Communication
4. New Data

External Environment Outlook

• The recovery of economic activity in the effective euro area will be driven by a reopening of services supported by spending of part of the forced savings created during lockdowns.

• The price pressures in industrial production are exceptionally strong at the moment. Both components - core and energy - will contribute to a sharp rise in foreign producer prices this year.

• The pressures on industrial producer prices reflect growth in prices of crude oil and other commodities as well as strong demand for industrial goods.

• The 3M EURIBOR outlook remains negative. The effect of unconventional monetary policy on the shadow interest rate is gradually diminishing. 3

Domestic Developments

• After an upward summer episode, the Stringency Index will fall rapidly again in the coming months. This summer episode should have no major impacts on the consumption of households. Next year, the Stringency Index will be at levels that will not have tangible effects on the economy.

• Government consumption will rise this year, albeit more slowly than before due to last year's high expenditure.

• Fiscal policy is increasing GDP growth this year mainly via support for household income and consumption; the fiscal impulse will be negative in 2022. Its restrictive effect stemming from the phasing out of support measures will be softened by an extraordinary increase in pensions. 4

Presentation Outline

1. Assumptions of the Forecast
2. The Macroeconomic Forecast
3. Monetary Policy Simulations, Decision and Communication
4. New Data