Macroeconomic Forecast - April 2017

ISSN 2533-5588

Summary of the Forecast

In the fourth quarter of 2016 economic growth in the Czech Republic accelerated slightly to 0.4% compared with the previous quarter, while in YoY terms real GDP increased by 1.9%. In 2016 as a whole economic output increased by 2.4%.

The main growth factor in 2016 was household consumption, which increased by 2.9% compared to 2015. Consumption growth was supported by the dynamics of employment and wages and last but not least by a very low inflation during most of the year.

The development of foreign trade also significantly contributed to the economic growth. Its contribution of 1.1 pp was almost evenly distributed between improvements on the balance of goods and the balance of services. A lower dynamics of foreign trade on the global scale and within the EU led to a slowdown in the YoY real growth of export of goods and services from 7.7% in 2015 to 4.3%. However, import saw a more considerable reduction in the growth rate from 8.2% to 3.2%, in particular due to a decrease in import-intensive investments.

Investments in fixed capital, which fell by 3.7% YoY, affected economic growth in the opposite direction. This decrease was due to investment by the general government sector, which slumped by almost one third in comparison with the very high base of the extraordinary year 2015. Conversely, investment activity in the non-financial corporations sector recorded an increase, namely in the fourth quarter of 2016.

On the supply side of the economy, real gross value added increased by 2.2% in 2016. The greatest contribution to its growth was traditionally reported by the manufacturing, mainly automotive, industry. In contrast, a YoY decrease was recorded in the construction sector, whose developments in the last year were related to a decrease in investment activity, and in industrial sectors other than manufacturing.

For the beginning of 2017 confidence indicators, Purchasing Managers' Index, industrial production and retail sales all indicate stronger economic growth than at the end 2016.

On the side of domestic demand, we expect resumption of growth in gross fixed capital formation. A gradual start of projects co-funded by the EU from the 2014-2020 programming period will support not only general government investment but also private investment. Investment by the general government sector could thus increase again after a deep decline in 2016, whereas private investment growth should slightly accelerate. Along with the slowdown in the growth of export, the dynamics of investment, which is the most import-intensive component of domestic demand, will be reflected in lower contribution of net exports to GDP growth.

The forecast for real GDP growth in 2017 and 2018 remains almost unchanged. We expect the economy to grow by 2.5% annually in both this and the next year.

There was a strong acceleration in YoY growth of consumer prices above the CNB's inflation target in the last two months of 2016 and at the beginning of 2017. The acceleration of inflation was influenced mainly by prices of food and fuel, which reflected the increasing price of crude oil. Anti-inflationary effect of a decrease in prices of imported goods has subsided.

This acceleration of consumer prices growth leads to an increase in the forecast for the average inflation rate in 2017 from 2.0% to 2.4%, and in 2018 from 1.6% to 1.7%.

The expected discontinuation of the CNB's exchange rate commitment will then be connected with a higher volatility of the exchange rate and probably with some appreciation.

On the labour market, the economic boom is reflected in very high labour force utilization. Employment rose strongly again in the fourth quarter of 2016, by 2.2% YoY, which was the highest growth in the history of the Czech Republic. Seasonally adjusted unemployment rate (in an internationally comparable methodology) further fell to 3.4% in January 2017, being the lowest in the whole EU since the beginning of 2016. The low unemployment and mismatches between the supply of and demand for labour are reflected in a faster growth of real wages and unit labour costs. However, the lack of employees is becoming a barrier for further production growth. Thanks to a bigger-than-estimated decrease at the end of the last year, the forecast for unemployment rate in 2017 and 2018 is improved from 3.9% to 3.4% and from 3.9% to 3.3%, respectively. At this level, unemployment has very limited space to decline further.

The current account of the balance of payments has been in a surplus since 2014. It reached 1.1% of GDP in 2016 and was thus the highest in the history of the independent Czech Republic. The surpluses on the balance of goods and services are thus apparently exceeding the deficit of primary income, which is mostly influenced by an outflow of income from foreign direct investment in the form of dividends and reinvested earnings. Revision of data for the past and the subsequent change in the forecast for the primary income balance in direction of a higher deficit, however, leads to a downward revision of the forecast for surplus on the current account of the balance of payments. The forecast for 2017 is thus lowered from 1.2% of GPD to 0.4% of GDP, and the forecast for 2018 from 1.3% of GDP to 0.5% of GDP.

For the first time in history of the Czech Republic, the balance of the general government sector reached a surplus of 0.6% of GDP in 2016. As a result, the structural balance improved as well, by 1.1 pp YoY to a surplus of 0.5% of GDP. The improved balance of the general government sector was determined mainly by the revenue side of budgets, where tax revenues (including social security contributions) increased by 5.8%. The record-breaking positive outcome is also reflected in the level of total debt. In a YoY comparison, the general government debt fell from 40.3% of GDP to 37.2% of GDP. This outcome was mainly the result of the last year's absolute decrease in the state debt by almost CZK 60 billion.


Main Macroeconomic Indicators
  2012 2013 2014 2015 2016 2017 2018 2016 2017 2018
Current forecast Previous forecast
Gross domestic product bill. CZK 4 060 4 098 4 314 4 555 4 715 4 889 5 103 4 719 4 885 5 082
Gross domestic product growth in %, -0,8 -0,5 2,7 4,5 2,4 2,5 2,5 2,5 2,6 2,4
Consumption of households growth in %, -1,2 0,5 1,8 3,0 2,9 2,4 2,7 2,7 2,4 2,4
Consumption of government growth in %, -2,0 2,5 1,1 2,0 1,2 1,7 1,5 2,0 1,6 1,4
Gross fixed capital formation growth in %, -3,1 -2,5 3,9 9,0 -3,7 3,8 3,0 -2,4 3,8 3,0
Net exports contr. to real GDP growth, pp 1,3 0,1 -0,5 0,1 1,1 0,2 0,2 1,1 0,2 0,3
Change in inventories contr. to real GDP growth, pp -0,2 -0,7 1,1 0,3 0,7 0,0 0,0 0,4 0,0 0,0
GDP deflator growth in % 1,5 1,4 2,5 1,0 1,1 1,1 1,8 1,1 0,9 1,6
Average inflation rate % 3,3 1,4 0,4 0,3 0,7 2,4 1,7 0,7 2,0 1,6
Employment (LFS) growth in % 0,4 1,0 0,8 1,4 1,9 1,1 0,3 1,9 0,8 0,3
Unemployment rate (LFS) average in % 7,0 7,0 6,1 5,1 4,0 3,4 3,3 4,0 3,9 3,9
Wage bill (domestic concept) growth in %, 2,6 0,5 3,6 4,4 5,8 5,7 4,8 5,6 5,0 4,5
Current account balance % of GDP -1,6 -0,5 0,2 0,2 1,1 0,4 0,5 2,1 1,2 1,3
General government balance % of GDP -3,9 -1,2 -1,9 -0,6 0,6 0,4 . 0,5 . .
Exchange rate CZK/EUR   25,1 26,0 27,5 27,3 27,0 26,9 26,3 27,0 26,9 26,3
Long-term interest rates % p.a. 2,8 2,1 1,6 0,6 0,4 0,9 1,5 0,4 0,6 1,1
Crude oil Brent USD/barrel 112 109 99 52 44 56 57 44 57 57
GDP in Eurozone growth in %, -0,9 -0,3 1,2 2,0 1,7 1,5 1,6 1,6 1,4 1,6

Tables and Graphs

Preparation of the Macroeconomic Forecast

Updated: 25.07.2013

Evaluation of Forecasting History at the Ministry of Finance

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Updated: 6.4.2017


  • The Macroeconomic Forecast is prepared by the Economic Policy Department of the Czech Ministry of Finance. It contains a forecast for the current and the following year (i.e. until 2018) and for certain indicators an outlook for another 2 years (i.e. until 2020). It is published on a quarterly basis (usually in January, April, July and November).
  • Any comments or suggestions that would help us to improve the quality of our publication and closer satisfy the needs of its users are welcome. Please direct any comments to the following email address: macroeconomic.forecast(at)
  • Cut-off Date for Data Sources:
    The forecast was made on the basis of data known as of 31 March 2017.

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