Non-shocking predictions for 2024
1. Bad year for residential real estate
Even if the Czech National Bank (ČNB) cuts interest rates, interest rate refixes will be written into the market at an increased rate, and they will never be 1.89% as they will be by the spring of 2021. This will continue to suck out purchasing demand. All flats and houses priced above CZK 10 million will fall in price - the more expensive the more. Land will be a place holder, as in the great financial crisis. It will be a good idea to buy larger houses or flats and, if possible, split them into several smaller ones. It will also slow the growth of rents.
2. Government comes up with campaign against NIMBY
Even this will not help the construction sector emerge from the crisis. It will, however, assist in authorising another arms factory to reduce Russia's advantage over Europe in munitions production. NIMBY, or Not In My Backyard, is a term that refers to residents' attitudes towards allowing a public building to be constructed in their neighbourhood, which may reduce the area's livability.
3. The arms industry in Czechia will significantly strengthen.
The government will begin to significantly support the arms industry, primarily through loans, as banks will continue to be penalised for such loans due to ESG reasons. Ammunition production facilities will be classified as strategic interests (similar to infrastructure projects).
4. Inflation below 4 % p. a.
The average year-on-year inflation for 2024 will reach 3.5 percent. It will therefore be above the Czech National Bank’s 2 percent target, but below the result from 2021. If we were to somewhat evasively subtract the price increases from companies with natural monopolies or operating in oligopolies, the Czech National Bank's target would have been met.
5. Unemployment will approach five percent.
Automobile manufacturers and parts producers will be the primary ones laying off employees. For the first time since 2018, the number of unemployed will exceed the number of job vacancies. Such unemployment will contribute to low inflation.
6. ERÚ will reform the system and logic of payments for electricity distribution.
There will be a significant increase in emphasis on payments for capacity. This will lead to a further decline in the prices of holiday homes or their disconnection from electricity. It will not benefit the agriculture and forestry sectors either.
7. A dollar for 20 crowns
It will not be so much about the strengthening of the CZK against the EUR, but rather the weakening of the USD against the EUR. A weakening USD will not diminish the attractiveness of American stocks in the eyes of investors from the Czech Republic.
8. The government continues to nationalise.
Following the controversial nationalisation in the energy sector and the distribution of petroleum products, the government will proceed with the nationalisation of Liberty Steel and one or two companies from the engineering sector that find themselves in trouble. The motivation will be to maintain employment, as well as the potential future conversion to arms factories.
9. Poland as the new stronger brother.
The growing strength and confidence of larger Polish companies will lead to a record influx of Polish capital into the Czech Republic. They will primarily purchase from foreign owners who prefer their domestic markets. These acquisitions will cause discontent among our nationalists. The Polish chain Biedronka will enter the Czech market.
10. The introduction of premium services and co-payments in healthcare.
The government will realise that healthcare without reforming the financing of care and introducing patient incentives will merely become an ever-growing black hole with significant bargaining power.
Disclaimer: The text does not aim to be entirely correct or precise but rather to highlight potential risks in the development in the Czechia
Disclaimer 2: The risk of escalation of the war in Ukraine or an attempt to occupy Taiwan is not taken into account.
In Prague 28. 12. 2023