Czech Republic Economic Forecast

Czech Rep. Economic Outlook

November 27, 2018

Preliminary GDP data revealed that economic activity cooled slightly in Q3, with annual growth slowing to a near-two year low from an already relatively-weak showing in Q2. The third-quarter expansion was likely driven mainly by solid consumer spending, in which an overheated labor market and buoyant wage growth—partly stemming from public and private sector wage hikes—have propped up households’ disposable incomes. On the other hand, it seems that softer external demand, primarily from the Eurozone, dragged on the headline figure. Available data for Q4, however, hints at slightly more upbeat activity, with economic sentiment edging higher on average in October–November from Q3 due to improved business confidence. Meanwhile, on 23 November, the government survived a no-confidence vote tabled by the opposition over a fraud scandal implicating Prime Minister Andrej Babis thanks to the coalition junior partner’s abstention from the vote, which should reduce political uncertainty ahead.

Czech Republic Economic Growth

Although the economy is expected to lose some momentum next year, growth is set to remain strong. Brisk wage gains, in part supported by a planned increase in the minimum wage in 2019, and an extremely-tight labor market will underpin healthy private consumption. This, coupled with strong fixed investment growth, should translate into upbeat domestic demand powering growth. Nevertheless, given the highly-open nature of the economy, a slowdown in external demand could dent export activity and weigh on overall industrial production. Met the why particular Consensus Forecast panelists see GDP growing 3.0% in 2019, which is unchanged from last month’s projection, and 2.6% in 2020.

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Czech Republic Facts

Bond Yield2.03-1.85 %Dec 11
Exchange Rate22.71-0.66 %Dec 11
Stock Market1,017-0.11 %Dec 11

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