Page 13 - bnemagazine bne_December 2021_20211203.pdf

bne December 2021 Companies & Markets I 13
massive hikes on inflation will only become apparent within a year. "The market is now expecting the central bank rates to go further up and reach 3.5% during the December and February meetings," he noted.
On the other hand, according to Deloitte economist Vaclav France, the tightening of monetary policy is appropriate. "Although the CNB will have no effect on energy and other commodity prices, which are currently rising steeply, it is preventing them from spilling over into inflation expectations. Only if inflation expectations are kept stable will inflation return to normal levels once the excesses in commodity
prices subside," he said.
France expects the CNB to continue tightening monetary policy. "But it would no longer have to 'fire a bazooka' against
inflation as it does today," he noted. Also Lubor Lacina from the Faculty of Operational Economics at Mendel University in Brno expects further interest hikes by CNB at its next meetings until inflation returns to 2%.
This has been confirmed by the CNB governor Jiri Rusnok during the press conference following the meeting. Rusnok assured that this was certainly not the last increase in rates in the near future. If the inflation is high, “taking interest rates towards neutral [3%] may not be enough”.
Peach expects CNB rates to reach 3.75% next year, up from previous forecast at 3.25%. “We think the scope for further large interest rate hikes is now becoming increasingly limited and we expect the tightening cycle to end in 1Q21 after another 100bp of rate hikes, to 3.75%,” he stressed.
EBRD lifts emerging Europe forecasts but warns of threats ahead
bne IntelliNews
The European Bank for Reconstruction and Development (EBRD) has increased its projection for growth in 2021 across the regions where it operates to 5.5%,
an upward revision of 1.3 percentage points (pp) compared to its June forecast.
The development bank said in its latest Regional Economic Prospects report released on November 4 that the revision follows a strong performance in the first half of the year, but it warned at the same time of “serious threats” ahead, among them inflation, rising commodity prices, tight labour markets and supply chain disruption.
Output across the EBRD regions grew by 6.3% year on year in the first half of 2021, following a contraction of 2.4% in 2020.
EBRD's GDP growth projections for 2021
In 2022, growth is anticipated to moderate to 3.8%, 0.1 pp lower than forecast in June.
“Mobility recovered earlier than in other parts of the world, while industrial production and retail sales rebounded. Exports of goods and services increased despite temporary supply chain disruptions. Remittances also grew in the second quarter of 2021, in some cases surpassing 2019 levels. Tourist arrivals exceeded expectations, but remained significantly below their 2019 levels in most EBRD economies,” the report commented.
The EBRD noted that its forecasts are “subject to high uncertainty, reflecting risks associated with the future path of COVID-19, possible worsening of external conditions and weaker growth in trading partners”.
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