Czech Republic Economic Forecast

Czech Rep. Economic Outlook

July 31, 2018

Monthly data shows the economy continued to lose some traction in Q2, following two straight quarters of cooling growth through Q1. After rebounding strongly in April, industrial production growth decelerated markedly in May on the heels of lower output of vehicles and pharmaceutical products. Furthermore, retail sales growth more than halved in the same month despite an exceedingly tight job market and recent wage hikes. Although the unemployment rate dropped to a new all-time low in June, consumer confidence also fell, which may imply another soft month for retail sales. In the political arena, Prime Minister Andrej Babis survived a parliamentary confidence vote on 12 July, thanks to the support from the Communist Party, that enabled his two-party minority government to finally take office—putting an end to more than eight months of political stalemate. It is expected that the new government will not change the direction of economic policy.

Czech Republic Economic Growth

The economy is expected to lose steam this year, but growth should remain robust overall. Healthy consumer spending, supported by high wage growth, rising employment and low interest rates, and government plans to increase spending, facilitated by the fiscal surplus on hand, should underpin economic activity going forward. Given the highly export-dependent nature of the country’s industrial base, the main downside risk to the outlook stems from a slowdown of external demand, particularly from the EU. Met the why particular Consensus Forecast panelists see GDP growing 3.4% in 2018, which is down 0.1 percentage points from last month’s projection, and 3.0% in 2019.

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Czech Republic Facts

Bond Yield2.14-1.85 %Aug 15
Exchange Rate22.71-0.66 %Aug 15
Stock Market1,068-0.11 %Aug 15

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