On top of that, in our considerations, the Bank Board must discuss the evolution of longer client interest rates and take into account how the interest rate transmission mechanism works and how changes in short-term rates will affect long-term rates. That is why our decisions take into account not only the opinion of the Monetary Department, but also that of the Financial Stability Department. We attribute a greater role to credit in the economy and debt, which our model previously left out. Deputy Governor Eva Zamrazilová will also talk about this after me. Deputy Governor Jan Frait also discussed this topic in his lecture at the university in Ostrava in 2023. Credit market developments very well combine our two main objectives – price and financial stability. The current data from money flow monitoring are as follows: The volume of new mortgages dropped by 70% year on year in 2023 Q1. To give an idea, CZK 149 billion in new mortgage loans was provided in 2022 as a whole, compared with CZK 368 billion a year earlier. The decrease in loans totalled CZK 219 billion. New koruna loans to firms fell by 56% year on year in Q1. However, firms are fleeing to the euro – 43% of new loans to firms are currently in euros. Nevertheless, this channel is also gradually cooling as the ECB raises its rates. In Q1, the volume of new euro loans to firms fell by 6% year on year.
The decline in production and investments will be confining the opportunities for an upturn in income. Consumer demand will be shrinking. The measures implemented by the Government and the Bank of Russia will support the economy, and specifically the most affected industries. Economic growth in 2021–2022 will largely be recovery-type. According to our forecast, GDP will expand by 3–5% in 2021 and by 1.5–3.5% in 2022. GDP growth will be promoted by a further implementation of national projects. However, our baseline forecast factors in only the already effective budget support measures. An upturn in the economy and domestic demand will also be driven by the easing of monetary conditions resulting from the monetary policy pursued. This will support lending, and its growth rate will rise from 3–8% this year to 6–11% in 2021–2022. The lending potential will also be maintained owing to the regulatory easing and the expansion of the Bank of Russia’s specialised refinancing instruments. According to our estimates, the easing of monetary policy is needed to maintain annual inflation close to 4% over the forecast horizon. The slump in domestic and external demand this year will be considerably containing inflation, which induces the risk of its substantial deviation downwards from the target in 2021 and over a medium-term horizon if no additional monetary policy measures are introduced. The disinflationary pressure of weak demand will offset the effect of temporary proinflationary factors, that is, the ruble weakening and the observed elevated demand for individual products, already this year.