Czech Republic Economic Forecast

Czech Rep. Economic Outlook

January 8, 2019

Available hard data suggests growth accelerated in the fourth quarter of 2018, following a subdued third quarter in which economic activity was constrained by tepid consumer spending and a negative performance of the external sector. Industrial production rebounded vigorously and export growth soared in October, boosted by strong car production. In the same month, retail sales bounced back, supported by an extremely tight labor market and rising wages. That said, survey-based indicators for October-December still point to a lukewarm expansion, suggesting the scope of the acceleration could be limited in Q4. In view of a possible future economic slowdown—and of its effects on banks’ balance sheets—in mid-December the Central Bank raised the counter-cyclical capital buffer for banks to 1.75%, which will take effect in January 2020. On the political front, on 20 December the parliament finally passed the 2019 budget, which targets a deficit of 0.7% of GDP and includes hikes in pensions and public sector wages.

Czech Republic Economic Growth

The economy is expected to maintain a broadly stable and solid pace of expansion this year. Private consumption should continue to expand, although at a somewhat slower rate compared to last year, supported by extremely tight labor market conditions and rising wages. Moreover, the positive economic performance is expected to translate into healthy fiscal parameters. That said, lingering global trade tensions and a faster-than-expected economic slowdown in the EU could hurt the external sector, weighing on GDP growth. Met the why particular Consensus Forecast panelists see GDP growing 2.9% in 2019, which is down 0.1 percentage points from last month’s projection, and 2.6% in 2020.

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Czech Republic Facts

Bond Yield1.78-1.85 %Jan 30
Exchange Rate22.58-0.66 %Jan 30
Stock Market1,035-0.11 %Jan 30

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