Page 49 - CE Outlook Regions 2022

In its outlook, KB reiterated that the shortage and significantly higher
prices of materials for production have added further uncertainty to
the development of Czech economy. However, the KB analysts
believe Czechia will successfully cope with the issues and return to
its pre-pandemic level in the 2H22.

As a result, exports will stagnate and will only recover fully after the
supply-side issues are resolved in the 2H22, when export growth will
also be supported by restarting international tourism. The Czech
central bank stressed that a strong growth in industrial producer
prices abroad, which is spilling over into Czech industrial and
consumer prices, will accelerate.

The automotive sector, which accounts for 9% of GDP and 24%
of exports, and which has faced a production fall by 4%
year-on-year in 3Q21, as a result of global shortage of
components, is expected to ease in 2022. According to Fitch
Ratings, structural changes in the sector, including a shift towards
electric passenger vehicles, represent challenges for the Czech
industry in the medium to long term. According to a survey by the
Czech Industry Barometer for the National Centre for Industry 4.0,
CEOs of industrial companies in Czechia expect sales to grow by an
average of 4.4% in 2022. Roughly one-fifth of companies expect
revenue growth of 8-10%, while only 5% of directors are worried
about a 18-20% drop in sales.

CEOs of large companies seem to be particularly more optimistic,
expecting their sales to grow by 5.7%, while small companies are
more reserved, projecting their sales growth at 3.7% in 2022. Sales
growth is expected to continue in 2023, with firms expecting their
sales to go up by 5.4%.

3.1.4 Energy & power

According to the CNB forecast, the growth in energy prices in
Czechia at the end of 2021 will not be reflected in consumer prices,
as it will be outweighed by the temporary waiver of VAT on electricity
and natural gas. Administered prices will rise sharply at the start of
2022, as high exchange prices of energy lead to a substantial
increase in the corresponding consumer prices, including heat
prices.

In the autumn of 2021, the Czech energy market was shaken by the
bankruptcy of the largest alternative energy supplier in Czechia,
Bohemia Energy, due to the rapid rise in energy prices, leaving
almost 1mn customers without a proper supplier. As a response, the

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