Slow economic recovery After last year’s stagnation, we expect GDP growth of just 0.7% this year and an acceleration to 1.9% next year. This is a worse outlook than our previous forecast, but we still expect stronger household consumption to contribute to the economic recovery, supported by continued real wage growth. We see industrial activity remaining weak this year.

Inflation to fall below target by 2025 We estimate that inflation will average 2.3% this year and decline to 1.7% next year. We expect it to be pushed below the 2% target mainly by lower growth in core and regulated prices, reflecting an excessively tight monetary policy, still-weak demand and falling energy prices.

CNB to cut interest rates further While central bankers have pointed to a slowdown in the pace of rate cuts, recent data support further significant monetary easing. We expect the key repo rate to end the year at 3.75% and to reach its terminal level of 3.5% in February next year.