Czech Republic Economic Forecast

Czech Rep. Economic Outlook

February 5, 2019

The economy appeared to gain some momentum in the final quarter of 2018, following a modest showing in the third quarter which was buttressed by upbeat domestic demand. Industrial output slowed in November but nevertheless remained solid on the back of strong car production, which also translated into buoyant growth of sales abroad. Furthermore, although the unemployment rate edged up in December, this was mainly due to seasonal factors and the labor market remains extremely tight. Coupled with the multi-year high wage growth that has been logged in recent months, this indicates robust household spending at year-end. The strong retail sales’ figures in October and November—particularly in the core sectors which exclude fuel, food and cars—reinforce this trend. It seems, however, that the economy entered 2019 on softer footing: The PMI dipped to a six-year low in January due to a fall in output and new orders amid weaker external demand.

Czech Republic Economic Growth

Growth is expected to slow a tad but remain solid this year. An overly tight job market and buoyant wage dynamics should continue propelling private consumption ahead. Meanwhile, despite losing some strength, capital expenditure should continue expanding at a healthy clip, in part supported by increased infrastructure investments. On the downside, ongoing global trade tensions and a faster-than-expected slowdown in activity in the EU could weigh on the external sector’s contribution to growth. FocusEconomics Consensus Forecast panelists see GDP growing 2.7% in 2019, which is down 0.2 percentage points from last month’s projection, and 2.6% in 2020.

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Czech Republic Facts

Bond Yield1.81-1.85 %Feb 14
Exchange Rate22.89-0.66 %Feb 14
Stock Market1,049-0.10 %Feb 14

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