Czech Republic Economic Forecast

Czech Rep. Economic Outlook

June 4, 2019

Recently-released GDP data showed that growth held steady in Q1 from Q4 2018’s healthy upturn. Household spending, which strengthened amid buoyant real wage growth and an extremely tight job market that saw the unemployment rate dip to a historic low, drove growth in the quarter. Fixed investment cooled markedly while net trade improved marginally, but this was mainly due to a sharp slowdown in imports. Looking at Q2, available data hints at somewhat softer activity. After an uptick in April, economic sentiment tumbled to a near-three year low in May. In particular, confidence in the industrial sector declined amid a deterioration of firms’ near-term outlook—reflective of still-elevated trade tensions and weak dynamism of German manufacturing. Meanwhile, on 31 May, the European Commission determined that Prime Minister Andrej Babis breached conflict-of-interest rules over his ties with the Agrofert conglomerate, which he placed in trust funds in 2017. If the findings are confirmed in further proceedings, his minority government could face a potential no-confidence vote.

Czech Republic Economic Growth

Although the economy is seen losing some steam this year, growth should remain solid overall. In particular, private consumption—buoyed by rising wages and low unemployment—should continue driving activity. Given the country’s export-oriented industrial base, weakening EU demand and an intensification of global trade conflicts pose key risks to the outlook. Met the why particular analysts expect growth of 2.6% in 2019, which is down 0.1 percentage points from last month’s forecast, and 2.5% in 2020.

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Czech Republic Facts

Bond Yield1.60-1.85 %Jun 13
Exchange Rate22.66-0.66 %Jun 13
Stock Market1,051-0.11 %Jun 13

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