“The structures of society and the economy are not fatally disrupted. We are not after the war, nor did a comet fall in the middle of the Czech Republic. That would encourage some optimism. And we believe and expect that the economy could gradually return to normal, “says CNB Governor Jiří Rusnok in this part of the interview.
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(The first part of the interview with Governor Rusnok can be found HERE.)
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For this year, the CNB expects growth of slightly over two percent. “But it will definitely not be enough for us to return to pre-pandemic levels this year. In our forecast, we have some economic growth of 2.2 percent. However, all this is conditioned, of course, by the assumptions that the pandemic will be gradually managed in the first half of the year and it will begin to subside, “said the Governor for SZ Business.
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According to Rusnok, the loosening that part of the business is calling for is not appropriate in the current situation. According to him, the short complete lockdown promoted by CMKOS chairman Josef Středula would be without effect: “I think that we have already enjoyed the closure enough and that we have tested that it does not work very well. So I personally don’t see it as much of a benefit that it’s worth it. Vaccination, testing and compliance processes need to be improved – rather than shutting down the economy altogether, even for a few days. “
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What awaits Jiří Rusnok from 2021?
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It’s not worth painting things in pink, even though it would probably suit my position. But the situation is not good.
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Why would that suit your position? Should the Governor of the Czech National Bank paint the situation in pink?
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The governor certainly does not cause uncertainty and panic. It is not appropriate either, so the bad situation we are experiencing is not. From a macroeconomic point of view, the year is burdened with huge uncertainty. We ourselves are relatively optimistic and expect that after all the pandemic problems in the first and partly the second quarter have subsided, the economy and society could return to normal quickly.
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Jiří Rusnok in the SZ Business studio in the Stock Exchange Palace in Prague.
The structures of society and the economy are not fatally disrupted, we are not a comet after the war or in the middle of the Czech Republic. That would encourage some optimism. And we believe and expect that the economy could gradually return to normal. But it will definitely not be enough this year to return to pre-pandemic levels. In our forecast, we have some economic growth of 2.2 percent. However, all this is conditioned, of course, by the assumptions that the pandemic will be gradually managed in the first half of the year and that it will gradually begin to subside.
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I partially believe that, but it’s so unpredictable that I wouldn’t put my head on it, there are too many risks. And if the risks are realized on a larger scale, then it may be another lost year with zero growth or even another slight decline. This is a scenario of a persistent pandemic. And it will hurt more.
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Part of the business claims that the economy should loosen, no matter how unfavorable the pandemic is developing in our country. It’s just been taking too long. How do you view it?
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There is no absolute answer to that. No one knows what the pity is. Of course, when we see that the hospitals are almost before the collapse and we are the worst in Europe and maybe in the world, then talking about the dismantling probably looks quite inappropriate.
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Isn’t it cynical to talk about loosening in this situation?
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Cynical for some, probably yes, for some, on the contrary, it can be cynical that we keep a part of society in a certain closure, it cannot realize its normal economic life, on which it depends. And if she doesn’t have reserves or has already exhausted them, she gets into existential problems. There are others here who have to answer this, I can’t tell you anything sensible about it.
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Trade union leader Josef Středula, on the other hand, has now come to the conclusion that the Czech economy should close completely for a few days. It requires a hard lockdown, including businesses. What would it mean for the economy?
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I think we’ve enjoyed the closure enough and we’ve tried that it doesn’t work very well. So I personally don’t see it as much of a benefit that it’s worth it. It is necessary to improve the processes of vaccination, testing, compliance with the rules – than to close the economy totally, even for a few days.
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What would you see as essential for the Czech economy to return to normal as quickly as possible?
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Simple answer. So it all depends on vaccination?
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In my opinion, it all matters. Of course, I’m not talking about what will happen in two or three years, when we’ll see how effective the vaccination is, how long the immunization takes, how much we have to repeat it, and how quickly we learn to organize it, but for that short period of year, year and a half, two years, I think it’s all about vaccinations.
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And how else can the state support economic recovery?
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By not making fatal mistakes that will unnecessarily prolong the pandemic.
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Well, for example, that we vaccinate almost the slowest in Europe. And by the fact that we can’t handle it in terms of capacity. I think that the state should sensibly withdraw from support measures. As long as demand is severely crippled, it should maintain some support for the economy. On the other hand, if private demand from households and businesses proves to be able to start up quickly, it should be able to back down from those support measures very quickly. This requires flexibility from the state.
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We will see that moment relatively quickly. Every month we have figures on retail turnover, industrial production, construction production, services. We have some leading indicators that say how industry, services, transport see their demand, so there is a relatively flexible response.
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And you don’t see that moment yet?
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No, unfortunately I do not see it at the horizon of the first half of the year.
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