Macroeconomic Forecast - April 2018

ISSN 2533-5588

Summary of the Forecast

The growth of the world economy remains strong. It is supported by investment, dynamics of the global trade, favourable financial conditions and expansive economic policies. In 2017 the economic growth in both the Euro Area and the European Union significantly exceeded previous expectations, confirming the transition from recovery to economic expansion. Favourable developments are expected also in this and the next year. The continued growth should be accompanied by an improvement in the labour market situation, unprecedentedly high confidence of economic entities and the resulting increase in household consumption and revival of investment activity.

The favourable developments in countries of the main trading partners and the positive situation within the Czech economy create conditions for further successful continuation of the economic boom in the Czech Republic. The main barrier for a higher growth can be considered the situation in the labour market, which shows symptoms of overheating.

The YoY real gross domestic product growth accelerated to 5.5% in the fourth quarter of 2017, which is the most since the second quarter 2015, when the economy was, however, largely stimulated by the end of the 2007-2013 financial perspective of European Union projects. In the QoQ comparison (after adjustment for seasonal and calendar effects), the economic growth accelerated slightly to 0.8%.

A traditionally significant component of use was household consumption. It increased by 4.3% YoY, not only due to high dynamics of the wage bill, but also due to a decrease in the savings rate, which reflects situation in the labour market, low interest rates and high consumer confidence in future developments. The general government consumption growth was 1.5%.

The growth in investment in fixed capital continued to accelerate in the fourth quarter, to 7.8%. Investment in machinery, equipment (excluding transport equipment) and information and communication technologies accounted for almost a half of that result. However, growth was recorded in all categories of investment. In sectoral terms, the high investment activity was driven by private investment as well as investment of the general government sector. Gross capital formation (including change in inventories) recorded even double-digit growth (11.5%).

In the fourth quarter of 2017, the contribution of foreign trade with goods and services to the economic growth was only slightly positive (0.1 pp). Growth in exports, supported by increasing external demand, thus almost offset the growth in imports, which reflected mainly a high import intensity of exports and investments.

The positive economic situation should continue also in 2018 and 2019. Growth should continue to be driven by household consumption reflecting the wage dynamics and an extremely low unemployment rate, an increasing participation rate and a very high number of job vacancies. Investment should be stimulated not only by funds from the European Structural and Investment Funds, a need of the private sector to innovate technological equipment amid imbalances in the labour market but also by decreasing relative cost of capital to the cost of labour at still low real interest rates.

Real gross domestic product growth in 2017 reached 4.4%. The forecast for 2018 is revised slightly upwards from 3.4% to 3.6%. Due to an increased likelihood that similarly favourable economic developments will continue also in the next year, the forecast for GDP growth in 2019 is raised more significantly from 2.6% to 3.3%. There is also a change in the expected growth structure for both years-the dynamics of domestic demand increases, which is offset by a lower contribution of net exports to GDP growth.

Since the beginning of 2017, the YoY consumer prices growth oscillates, with a few exceptions, in the upper half of the tolerance band of the Czech National Bank's 2% inflation target. We expect, however, that anti-inflationary effects resulting from the anticipated tightening of monetary conditions, especially in the exchange rate component, will outweigh pro-inflationary effects of rising wages and a positive output gap. Therefore, we are lowering the forecast for the average inflation rate in 2018 and 2019, also with regard to an error in the January forecast, from 2.6% to 2.1% and from 2.1% to 1.9%, respectively.

High employment growth, which has steadily exceeded 1% since the end of 2014, has almost exhausted unused resources in the labour market. Lack of employees is thus becoming a barrier for an extensive production growth, which motivates companies for investment increasing labour productivity.

The room for a further decline in unemployment is, apparently, very limited. We thus keep the forecast for the unemployment rate in 2018 and 2019 at 2.4% and 2.3%, respectively.

The current account of the balance of payments reached a surplus of 1.1% of GDP in 2017. The positive balances of goods and services significantly exceed 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. The surplus on the current account was lower in 2017 than for most of 2016, mainly due to higher domestic demand for imports influenced by the growth in consumption and investment.

With regard to the current revision of data for 2016 and 2017 (higher current account surplus) and the changes in expected structure of economic growth outlined above, the forecast for the current account surplus increases slightly to 0.4% of GDP in 2018 and 0.2% of GDP in 2019.

The balance of the general government sector reached a record-high surplus of 1.6% of GDP in 2017. It also resulted in a YoY improvement of 0.2 pp in the structural balance, which reached a surplus of 1.1% of GDP. The improved budget performance of the general government sector was significantly driven by revenues of public budgets, as tax revenues - including social security contributions - rose by 7.7%. The level of total indebtedness also reflects the record-high surplus, having decreased by 2.2 pp YoY to 34.6% of GDP. For the year 2018 the forecast envisages a positive balance amounting to 1.5% of GDP and further decrease in debt to the level of 32.9% of GDP.


Main Macroeconomic Indicators
  2013 2014 2015 2016 2017 2018 2019 2017 2018 2019
Current forecast Previous forecast
Gross domestic product bill. CZK 4 098 4 314 4 596 4 773 5 055 5 320 5 596 5 042 5 304 5 530
Gross domestic product growth in %, -0,5 2,7 5,3 2,6 4,4 3,6 3,3 4,3 3,4 2,6
Consumption of households growth in %, 0,5 1,8 3,7 3,6 4,0 4,3 4,1 4,0 3,7 2,7
Consumption of government growth in %, 2,5 1,1 1,9 2,0 1,5 1,9 2,0 1,9 1,8 1,5
Gross fixed capital formation growth in %, -2,5 3,9 10,2 -2,3 5,4 5,7 4,4 5,6 4,1 3,4
Net exports contr. to GDP growth, pp 0,1 -0,5 -0,2 1,2 1,0 -0,2 -0,1 1,0 0,2 0,1
Change in inventories contr. to GDP growth, pp -0,7 1,1 0,8 0,0 -0,1 0,0 0,0 -0,3 0,0 0,0
GDP deflator growth in % 1,4 2,5 1,2 1,2 1,4 1,5 1,8 1,3 1,8 1,7
Average inflation rate % 1,4 0,4 0,3 0,7 2,5 2,1 1,9 2,5 2,6 2,1
Employment (LFS) growth in % 1,0 0,8 1,4 1,9 1,6 0,7 0,2 1,6 0,6 0,2
Unemployment rate (LFS) average in % 7,0 6,1 5,1 4,0 2,9 2,4 2,3 2,9 2,4 2,3
Wage bill (domestic concept) growth in %, 0,5 3,6 4,8 5,8 8,3 7,7 6,5 7,9 7,7 4,9
Current account balance % of GDP -0,5 0,2 0,2 1,6 1,1 0,4 0,2 0,5 0,1 0,1
General government balance % of GDP -1,2 -2,1 -0,6 0,7 1,6 1,5 1,1 1,1 1,3 .
Exchange rate CZK/EUR   26,0 27,5 27,3 27,0 26,3 25,1 24,7 26,3 25,4 25,0
Long-term interest rates % p.a. 2,1 1,6 0,6 0,4 1,0 1,9 2,2 1,0 1,7 2,0
Crude oil Brent USD/barrel 109 99 52 44 54 65 61 54 68 64
GDP in Eurozone growth in %, -0,2 1,3 2,1 1,8 2,3 2,3 1,8 2,4 2,3 1,9


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: 11.4.2018


  • 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 2019) and for certain indicators an outlook for another 2 years (i.e. until 2021). 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 3 April 2018.

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