Macroeconomic Forecast - November 2021

ISSN 2533-5588

Introduction and Summary

The vaccination against COVID-19, the relaxation of anti-epidemic restrictions and the strong economic policy stimulus in the developed world have boosted global economic growth. In countries with high vaccination coverage, the new coronavirus mutations have so far had little impact, but elsewhere they have slowed economic dynamism and exacerbated problems in global supply chains. Sharp increases in the prices of shipping and commodities, including energy, as well as hitherto loose monetary and fiscal policies, have been reflected in accelerating inflation across all price categories, including consumer prices.

The very open Czech economy, with a high share of car production in value added, is highly vulnerable in this respect. Problems on the supply side of the economy are reinforcing the unfavourable inflationary developments, lead to a slowdown in the economic recovery after the coronavirus epidemic and contribute to a decrease in the current account surplus.

In Q2 2021, real gross domestic product of the Czech Republic, adjusted for seasonal and calendar effects, increased by 1.0% QoQ. The 8.8% year-on-year growth was affected by the extremely low base of Q2 2021. In Q3 2021, the economy grew by 1.4% QoQ, according to the preliminary estimate of the Czech Statistical Office.

Annual growth in Q2 was largely driven by household consumption, which rose by 7.7%. This was due both to a very dynamic increase in real disposable income and to the loosening of anti-epidemic restrictions, which, together with higher consumer confidence, resulted in a decline in the savings rate. General government consumption rose by 3.1%, driven by increased health spending as well as employment growth.

Gross fixed capital formation was 4.9% higher. The most significant increases were in investment in housing and in machinery and equipment, including vehicles. From a sectoral perspective, private sector investment was crucial, but the government sector also contributed positively to growth.

The change in inventories and valuables also provided a significant boost to the economy (contribution of 2.5 pp), which was related to restocking of inventories and an increase in stocks of work in progress. The contribution of the foreign trade balance was 0.8 pp.

In the forecast, we work with the scenario that both the vaccination of the population and the high number of people who have already had COVID-19 should prevent the need to adopt macroeconomically significant anti-epidemic restrictions. On the other hand, the adverse effects of rising input prices and disruptions in production chains should persist in the remainder of this year and early next year.

The expected 2.5% growth in economic output this year should be driven by all components of domestic demand, most notably household consumption, inventory change and fixed capital investment. While problems in global supply chains should have a significant negative impact on exports, rising fixed investment and inventories should further support imports. The external trade balance should thus slow economic growth sharply.

In 2022, economic growth could reach 4.1% thanks to a continued recovery in private consumption and fixed investment and a more favourable contribution from the external trade balance.

Accelerating inflation is becoming a major macroeconomic concern. Annual inflation was 4.9% in September 2021. Inflationary pressures are therefore much stronger than expected in the August macroeconomic forecast. High energy and other commodity prices are gradually feeding through to other prices. Supply-side problems are proving to be a major factor in inflation, while demand is still supported by very loose monetary and fiscal policy. Moreover, economic performance is likely to be above its potential next year. The accumulation of these factors leads us to raise our forecast for the average inflation rate to 3.5% in 2021 and 6.1% in 2022.

Despite the end of the government’s employment support measures, there has been no increase in unemployment – the seasonally adjusted unemployment rate (Labour Force Survey) was 0.5 pp lower in August 2021 than at its peak in March. The effect of the easing of anti-epidemic restrictions and the impact of strong labour demand in some sectors, especially in industry, clearly prevailed. The unemployment rate is expected to average 3.0% in 2021 and could fall to 2.7% in 2022 thanks to the economic recovery.

The current account of the balance of payments showed a substantial surplus of 3.4% of GDP in Q2 2021, reflecting the peak of the surplus of goods balance driven by strong external demand for capital goods. However, in the second half of the year, the trade surplus is expected to decline significantly due to production shutdowns in the export-oriented automotive industry resulting from component shortages, and strong import dynamics for investment purposes. At the same time, the profitability of foreign-controlled enterprises can be expected to recover and the primary income deficit to widen. We therefore expect a slightly negative balance on the current account this year and next.

The general government sector’s performance in 2021 is heavily weighed down by the situation triggered by the coronavirus epidemic, its economic consequences and the measures implemented in the health sector and the stimulus fiscal policy. Expansionary fiscal policy is expected to lead to a deficit of 7.2% of GDP and a rise in debt to 43.3% of GDP. In 2022 the general government balance should no longer be affected by the effects of the adopted anti-epidemic measures, and fiscal consolidation should start at the same time. We therefore estimate that the overall deficit will reach 4.4% of GDP, with debt rising 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 6 038 6 498 6 048 6 431
  nominal growth in % 3,7 6,5 5,8 7,0 -1,7 6,0 7,6 6,2 6,3
Gross domestic product real growth in % 2,5 5,2 3,2 3,0 -5,8 2,5 4,1 3,2 4,2
Consumption of households real growth in % 3,8 4,0 3,5 2,7 -6,8 3,7 4,7 2,3 5,5
Consumption of government real growth in % 2,5 1,8 3,8 2,5 3,4 2,3 0,4 2,4 0,4
Gross fixed capital formation real growth in % -3,0 4,9 10,0 5,9 -7,2 4,6 5,4 6,0 4,9
Contribution of net exports pp 1,4 1,2 -1,2 0,0 -0,5 -2,5 0,4 -0,6 0,3
Contrib. of change in inventories pp -0,3 0,5 -0,5 -0,3 -0,9 1,6 0,0 0,7 0,0
GDP deflator growth in % 1,1 1,3 2,6 3,9 4,4 3,4 3,4 2,9 2,1
Average inflation rate % 0,7 2,5 2,1 2,8 3,2 3,5 6,1 3,2 3,5
Employment (LFS) growth in % 1,9 1,6 1,4 0,2 -1,3 -0,5 0,8 -1,0 0,4
Unemployment rate (LFS) average in % 4,0 2,9 2,2 2,0 2,6 3,0 2,7 3,0 2,7
Wage bill (domestic concept) growth in % 5,7 9,2 9,6 7,8 0,2 5,3 5,1 2,9 3,9
Current account balance % of GDP 1,8 1,5 0,4 0,3 3,6 -0,1 -0,3 1,1 0,5
General government balance % of GDP 0,7 1,5 0,9 0,3 -5,6 -7,2 -4,4 -7,7 -5,0
Exchange rate CZK/EUR   27,0 26,3 25,6 25,7 26,4 25,6 25,0 25,7 25,3
Long-term interest rates % p.a. 0,4 1,0 2,0 1,5 1,1 1,9 2,7 2,0 2,6
Crude oil Brent USD/barrel 44 54 71 64 42 70 72 69 68
GDP in the euro area real growth in % 1,8 2,8 1,8 1,6 -6,5 5,0 3,9 4,9 4,3


Tables and Graphs

Preparation of the Macroeconomic Forecast

Evaluation of Forecasting History at the Ministry of Finance


  • 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 29 October 2021; the cut-off date for selected forecast assumptions was 5 October 2021.

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