Normally, people don’t spend much during a recession and this keeps prices down. But the Czech Republic isn’t experiencing a normal recession, so prices are rising. The Czech Statistics Office reports that consumer prices rose 3.4 percent in July, compared to a year ago. The same thing is happening to the country’s regional partners Poland and Hungary, giving this region the highest inflation figures of anywhere in Europe. Komercni banka’s economist Michal Brozka told the economic daily Hospodarske noviny was shocking. “We assumed that inflation would slow down possibly to below 2 percent,” he said. And he’s not alone, as ING Bank’s Jakub Seidler was willing to admit. “The Covid-19 situation is unique,” he said. “The development of economic indicators is very unsure and that includes inflation.” The biggest jumps are being seen in the prices for food, tobacco products and alcohol, but rents and electricity prices have also risen. The falling price of the koruna was also an influencing factor, though the currency is now rising again in value. The Czech government’s various cash injections to support the economy may also have had an impact as unemployment has risen more slowly than might be expected. “Businesses tried to raise prices in order to compensate for falling sales and it worked out for them,” concludes Seidler.
