Skyline of Prague, Czech Republic

Czech Republic Economic Forecast

Czech Republic Economic Outlook

The economy shrank in quarter-on-quarter terms in Q4 2022. A significant contraction in private consumption amid high inflation, downbeat sentiment and tighter financing conditions was the main driver of this. Momentum appears to have remained subdued in early 2023. Business and consumer sentiment were both downbeat in January and February, while the manufacturing PMI remained entrenched in contractionary territory during the same period, weighed down by declining new orders and output. On top of this, inflation accelerated further in January, likely hitting consumer spending. In politics, in mid-February the government decided to weaken the indexation of old-age pensions due to a widening fiscal deficit. This measure will have to be ratified by Parliament, where a major battle is expected.

Czech Republic Inflation

Inflation rose to 17.5% in January from 15.8% in December—mainly due to faster increases in prices for alcoholic beverages and tobacco and housing and utilities—moving further above the Central Bank’s 1.0–3.0% target range. Inflation should gradually ease this year, although it will remain elevated due to fast nominal wage growth and protracted pass-through effects.

Czech Republic Economic Data

2017 2018 2019 2020 2021
Population (million) 10.6 10.6 10.7 10.7 10.5
GDP (USD bn) 219 249 253 246 282
GDP per capita (USD) 20 23 23 22 26
GDP (EUR bn) 194 211 226 216 238
GDP per capita (EUR) 18 19 21 20 22
GDP (CZK bn) 5 5 5 5 6
Economic Growth (Nominal GDP, ann. var. %) 6.5 5.9 7.0 -1.4 7.0
Economic Growth (GDP, ann. var. %) 5.3 3.2 3.0 -5.5 3.5
Domestic Demand (ann. var. %) 4.3 4.9 3.2 -5.4 8.4
Private Consumption (ann. var. %) 4.0 3.3 2.6 -7.4 4.1
Government Consumption (ann. var. %) 1.8 3.9 2.5 4.2 1.4
Fixed Investment (ann. var. %) 5.1 10.0 5.9 -6.0 0.8
Exports (G&S, ann. var. %) 7.6 3.7 1.3 -8.1 6.8
Imports (G&S, ann. var. %) 6.5 5.8 1.5 -8.2 13.2
Industrial Production (ann. var. %) 6.7 3.0 -0.3 -7.2 6.6
Retail Sales (ann. var. %) 5.5 4.9 4.8 -0.7 4.3
Disposable Income (ann. var. %) 4.4 3.7 3.3 2.2 3.1
Wages (ann. var. %) 6.7 8.2 7.9 4.6 4.7
Unemployment (% of active population, aop) 2.9 2.3 2.0 2.6 2.8
Fiscal Balance (% of GDP) 1.5 0.9 0.3 -5.8 -5.1
Public Debt (% of GDP) 34.2 32.1 30.0 37.7 42.0
Money (ann. var. of M2 %) 8.6 5.6 7.0 10.7 7.0
Inflation (CPI, ann. var. %, eop) 2.4 2.0 3.2 2.3 6.6
Inflation (CPI, ann. var. %, aop) 2.5 2.1 2.8 3.2 3.8
Inflation (HICP, ann. var. %, aop) 2.4 2.0 2.6 3.3 3.3
Inflation (PPI, ann. var. %, aop) 1.8 2.0 2.6 0.1 7.1
2-Week Repo Rate (%, eop) 0.50 1.75 2.00 0.25 3.75
3-Month PRIBOR (%, eop) 0.76 2.01 2.18 0.36 4.08
10-Year Bond Yield (%, eop) 1.72 1.85 1.63 1.28 2.73
Stock Market (ann. var. of PX-50 %) 17.0 -8.5 13.1 -7.9 38.8
Exchange Rate (CZK per USD, eop) 21.26 22.51 22.64 21.46 21.85
Exchange Rate (CZK per USD, aop) 23.37 21.74 22.93 23.21 21.69
Exchange Rate (CZK per EUR, eop) 25.53 25.74 25.41 26.26 24.85
Exchange Rate (CZK per EUR, aop) 26.35 25.66 25.67 26.46 25.64
Current Account Balance (EUR bn) 3.0 0.9 0.7 4.3 -6.6
Current Account Balance (% of GDP) 1.5 0.4 0.3 2.0 -2.8
Merchandise Trade Balance (EUR bn) 9.8 7.8 9.3 10.6 2.7
Merchandise Exports (EUR bn) 129 136 139 128 149
Merchandise Imports (EUR bn) 119 128 130 117 146
Merchandise Exports (ann. var. %) 9.1 5.6 2.3 -8.2 16.0
Merchandise Imports (ann. var. %) 9.6 7.7 1.2 -9.7 24.2
Foreign Direct Investment (EUR bn) 7.9 9.6 9.0 7.7 5.1
International Reserves (EUR bn) 123.2 124.7 133.5 135.8 152.7
International Reserves (months of imports) 12.4 11.6 12.3 13.9 12.6
External Debt (EUR bn) 171 171 173 165 182
External Debt (% of GDP) 88.3 81.3 76.5 76.3 76.3

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