Macroeconomic Forecast - August 2021

ISSN 2533-5588

Introduction and Summary

Improved epidemic situation and the resulting easing of measures to contain the spread of coronavirus, increased consumer and business confidence and strong fiscal stimuli put the world’s advanced economies back in motion. These factors are outweighing the temporary disruption to production chains caused by shortages of certain inputs and hikes in their prices. The short-term outlook for the EU economies has thus substantially improved.

Forecasts for consumer inflation are being revised up in response to the rising prices of energy and other commodities, production barriers due to shortages of components and raw materials, capacity constraints in the face of expanding demand, and loose monetary policy pursued by central banks.

Despite the dismal epidemic situation and restrictions in numerous areas, the Czech economy recorded only a slight decline in Q1 2021. Real gross domestic product adjusted for seasonal and calendar effects shrank by 0.3% QoQ and its year-on-year decrease eased to 2.6%. The economy grew by 0.6% QoQ in Q2, according to the flash estimate.

As for domestic demand, the year-on-year drop in household consumption moderated to 6.2% in Q1. Some parts of retail trade and certain services remained hobbled by anti-epidemic measures. This, combined with heightened uncertainty about the future, kept the savings rate extremely high. General government consumption grew by 1.1%, pushed up by increased health spending and employment growth.

Fixed capital investments fell by 3.0%. The most important decrease could be found in investments in machinery and equipment, including transport equipment, and in non-residential construction. From the sectoral perspective, a small increase in public and household investment had a positive effect.

The change in inventories gave the economy a major boost (contribution of 1.2 pp) thanks perhaps to the replenishment of warehouse inventories. This was also reflected in the strong momentum of imports of goods, which resulted in external trade contributing −0.5 pp.

In the forecast, we adopt the scenario that the progress in vaccination of the population and the high number of people who have already contracted COVID-19 should prevent the need to adopt further macroeconomically significant anti-epidemic restrictions. Consequently, economic activity should substantially recover from Q3 2021 onwards and gradually cancel out the previous shock to aggregate demand and supply.

The expected 3.2% increase in economic output this year should be driven by all components of domestic demand, most notably fixed capital investments and household consumption. Due to high import momentum, the external trade balance should slow down economic growth slightly. Inventory restocking should act in the opposite direction this year, supported by an accumulation of work-in-progress inventories caused by problems in supply chains.

Economic growth could accelerate to 4.2% in 2022, driven in particular by continued recovery in private consumption. The momentum of fixed capital investment should remain relatively strong. As export markets continue to grow, the external trade balance should also spur the economy slightly.

Inflationary pressures have turned out to be stronger than had been expected in the April macroeconomic forecast. High energy and other commodity prices are gradually being felt in other price categories, including consumer prices. To reflect this, we are raising our forecasts for the average inflation rate in 2021 and 2022 to 3.2% and 3.5%, respectively.

Labour market developments remain positive. Although most fiscal stimulus measures have been terminated, there has been no increase in unemployment. The seasonally adjusted unemployment rate (15–64 years) was 0.6 pp lower in June 2021 than in March. The effects of easing the anti-epidemic restrictions and the impact of strong labour demand in certain sectors, especially industry, have evidently prevailed. Nevertheless, the unemployment rate (LFS) should increase to 3.0% in 2021 due to delayed effects of the economic downturn. Economic recovery could push it back down to 2.7% in 2022.

The current account of the balance of payments reported a sizeable surplus of 3.5% of GDP in Q1 2021, as the surplus on the goods balance grew on the back of strong external demand for capital goods. The base effect stemming from production shutdowns in spring 2020 also played a role. Even so, there should be a pronounced decline in the trade surplus in the second half of this year due to the expected recovery in investment activity and a rise in oil prices. Parallel to this, the profitability of foreign-controlled businesses is forecast to pick up again and the primary income deficit to widen. The current account surplus could thus fall to 1.1% of GDP this year and then to 0.5% of GDP in 2022.

In 2021, the general government sector has been heavily burdened by the coronavirus epidemic, its economic consequences, and the measures implemented in public health and under the stimulus fiscal policy. We forecast a deficit equal to 7.7% of GDP. Expansionary fiscal policy is expected to result in a structural deficit of 6.1% of GDP and a rise in debt to 43.5% of GDP. Neither the economy nor the general government balance should be influenced by the epidemic in 2022. Assuming that consolidation will have started, we estimate the deficit to reach 5.0% of GDP and debt to increase to 46.2% of GDP.


Main Macroeconomic Indicators
2016 2017 2018 2019 2020 2021 2022 2021 2022
Current forecast Previous forecast
Nominal GDP bill. CZK 4 797 5 111 5 410 5 790 5 695 6 048 6 431 5 932 6 257
  nominal growth in % 3,7 6,5 5,8 7,0 -1,7 6,2 6,3 4,9 5,5
Gross domestic product real growth in % 2,5 5,2 3,2 3,0 -5,8 3,2 4,2 3,1 3,7
Consumption of households real growth in % 3,8 4,0 3,5 2,7 -6,8 2,3 5,5 0,1 5,7
Consumption of government real growth in % 2,5 1,8 3,8 2,5 3,4 2,4 0,4 3,4 0,9
Gross fixed capital formation real growth in % -3,0 4,9 10,0 5,9 -7,2 6,0 4,9 3,8 4,5
Contribution of net exports pp 1,4 1,2 -1,2 0,0 -0,5 -0,6 0,3 0,4 -0,2
Contrib. of change in inventories pp -0,3 0,5 -0,5 -0,3 -0,9 0,7 0,0 0,9 0,0
GDP deflator growth in % 1,1 1,3 2,6 3,9 4,4 2,9 2,1 1,8 1,7
Average inflation rate % 0,7 2,5 2,1 2,8 3,2 3,2 3,5 2,5 2,3
Employment (LFS) growth in % 1,9 1,6 1,4 0,2 -1,3 -1,0 0,4 -1,4 0,0
Unemployment rate (LFS) average in % 4,0 2,9 2,2 2,0 2,6 3,0 2,7 3,6 3,7
Wage bill (domestic concept) growth in % 5,7 9,2 9,6 7,8 0,2 2,9 3,9 0,7 2,3
Current account balance % of GDP 1,8 1,5 0,4 0,3 3,6 1,1 0,5 1,3 0,5
General government balance % of GDP 0,7 1,5 0,9 0,3 -6,1 -7,7 -5,0 -8,8 -5,9
Exchange rate CZK/EUR   27,0 26,3 25,6 25,7 26,4 25,7 25,3 25,9 25,5
Long-term interest rates % p.a. 0,4 1,0 2,0 1,5 1,1 2,0 2,6 1,5 1,8
Crude oil Brent USD/barrel 44 54 71 64 42 69 68 64 60
GDP in the euro area real growth in % 1,8 2,7 1,9 1,4 -6,5 4,9 4,3 3,8 3,6


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: 31.08.2021


  • The Macroeconomic Forecast is prepared by the Economic Policy Department of the Czech Ministry of Finance. It contains a forecast for the years 2021 a 2022 and for certain indicators an outlook for 2 following years (i.e. until 2024). It is published on a quarterly basis (in January, April, August and November).
  • Any comments or suggestions that would help us improve the quality of our publication and closer satisfy the needs of its users are welcome. Please send any comments to the following email address: macroeconomic.forecast(at)
  • Cut-off Date for Data Sources:
    The forecast is based on the data known as of 10 August 2021; the cut-off date for selected forecast assumptions was 27 July 2021.

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