Macroeconomic Forecast - January 2023

ISSN 2533-5588

Introduction and Summary

The pandemic-weakened world economy was hit by several shocks in 2022. The war in Ukraine has reduced global economic growth and intensified inflationary pressures, especially in the case of food and energy prices. In many countries, inflation rates in the second half of last year were the highest since the 1980s, to which central banks are responding by gradually raising interest rates. Consumer price inflation appears to have peaked in a number of countries, but the question is how quickly will inflation return to close to the inflation targets of individual central banks. In terms of the smooth functioning of global supply chains, further development of the pandemic, particularly in China, is a persistent risk.

In Q3 2022, real gross domestic product of the Czech Republic, adjusted for seasonal and calendar effects, fell by 0.2% QoQ. It was 1.6% higher year-on-year.

Household consumption slumped by 5.5% in Q3. Consumer spending was negatively affected not only by the decrease in real disposable income caused by accelerating inflation, but also by the rise in the savings rate. General government consumption fell by 1.5% despite continued growth in public sector employment.

Gross fixed capital formation increased by 4.9%. Investment in non-residential construction was the largest contributor, but with the exception of investment in dwellings, all major categories showed an increase. From the sectoral point of view, privately financed business investment was decisive, while household investment expenditure fell.

The change in inventories and valuables contributed only 0.3 pp to GDP growth. Although firms continued to increase inventories of production inputs to avoid losses resulting from high inflation and shortages in component supplies (stocks of work in progress may have also risen), the year-on-year increase in inventories was more or less in line with the long-term average.

The foreign trade balance supported economic growth to the extent of 2.8 pp. In addition to the recovery abroad and the easing of problems in supply chains, the low comparative base also contributed to the more than 10% year-on-year increase in exports – due to problems with component supplies, production in the automotive industry was curtailed in Q3 2021, which was negatively reflected in export dynamics at that time.

While the economy grew in the first half of last year despite adverse circumstances, it is expected to go through a mild recession in H2 2022 and early this year. Nevertheless, GDP for the full year 2022 increased by an estimated 2.3%. Growth was driven by fixed capital investment and increased inventory accumulation. Despite a number of fiscal stimulus measures, household final consumption expenditure fell slightly due to a sharp increase in the cost of living, especially energy prices, and tighter monetary policy.

GDP could fall by 0.5% in 2023. Households will continue to face the impact of high inflation this year, and their real consumption should fall further. Government consumption and gross fixed capital formation will be pro-growth, but weaker year-on-year inventory accumulation will slow the economy noticeably. The impact of the generally weak domestic demand will be partly offset by the external trade balance.

High inflation slows economic growth and lowers living standards. Not only food, fuel, electricity, natural gas and imputed rent, but also other categories of goods and services are contributing significantly to the exceptionally strong rise in consumer prices. Domestic demand pressures are also boosting inflation, but these should be dampened by higher monetary policy rates and the appreciation of the koruna. Thanks to the energy saving package, annual inflation declined markedly at the end of last year, but still averaged 15.1% for the year as a whole. Annual inflation is expected to remain around this level in Q1 2023 and to decline gradually thereafter. The average inflation rate should thus slow to 10.4% this year.

Labour market imbalances related to labour shortages continue to manifest themselves. Thus, despite the mild recession and the generally weak economic momentum in 2023, the unemployment rate should not increase much – from an average of 2.4% in 2022, it could rise to 3.2% this year. Persistent labour market tightness will push up wage growth, which will lag behind inflation, though. Following a decrease in 2022, the average real wage is thus expected to fall further this year.

The current account of the balance of payments showed a deficit of 5.3% of GDP in Q3 2022, mainly reflecting a deterioration in the balance of goods due to high energy commodity prices. The current account was also negatively affected by the highest ever outflow of dividends within primary income. Slowing economic growth abroad, a decline in export orders and rising input and energy prices continued to contribute to the negative balance of goods at the end of last year. Therefore, we estimate that the current account reached a deficit of 5.8% of GDP in 2022, which could narrow to 3.6% of GDP in 2023 as price pressures in industry and the energy sector ease.

Budgetary performance of the government sector in 2022 reflected the economic and financial consequences of Russia’s aggression against Ukraine and related humanitarian aid and support to economic actors affected by high prices. At the same time, measures that have significantly and permanently reduced the tax burden during the COVID-19 epidemic weigh on public finances. We estimate that public finances ended 2022 with a deficit of 3.6% of GDP and a debt ratio of 44.6% of GDP. We then expect the deficit to increase to 4.2% of GDP this year and the debt ratio to rise further to 45.8% of GDP, mainly due to extraordinary spending related to the energy crisis and rising mandatory social spending. However, the newly introduced measures and their functioning significantly increase the risks to the forecast.


Main Macroeconomic Indicators
  2017 2018 2019 2020 2021 2022 2023 2022 2023
Current forecast Previous forecast
Nominal GDP bill. CZK 5 111 5 411 5 791 5 709 6 109 6 749 7 308 6 674 7 092
  nominal growth in % 6,5 5,9 7,0 -1,4 7,0 10,5 8,3 9,3 6,3
Gross domestic product real growth in % 5,2 3,2 3,0 -5,5 3,6 2,3 -0,5 2,4 -0,2
Consumption of households real growth in % 4,0 3,5 2,7 -7,2 4,1 -0,7 -2,2 0,2 -0,8
Consumption of government real growth in % 1,8 3,9 2,5 4,2 1,4 0,8 1,5 1,2 1,7
Gross fixed capital formation real growth in % 4,9 10,0 5,9 -6,0 0,8 5,4 1,8 5,1 1,5
Contribution of net exports pp 1,2 -1,2 0,0 -0,4 -3,6 0,2 0,9 0,0 0,8
Contrib. of change in inventories pp 0,5 -0,5 -0,3 -0,9 4,8 0,8 -1,2 0,7 -1,4
GDP deflator growth in % 1,3 2,6 3,9 4,3 3,3 8,0 8,8 6,7 6,5
Average inflation rate % 2,5 2,1 2,8 3,2 3,8 15,1 10,4 15,0 9,5
Employment (LFS) growth in % 1,6 1,4 0,2 -1,3 -0,4 -0,8 -0,4 -0,9 -0,1
Unemployment rate (LFS) average in % 2,9 2,2 2,0 2,6 2,8 2,4 3,2 2,5 3,1
Wage bill (domestic concept) growth in % 9,2 9,6 7,8 0,1 5,9 9,3 6,7 10,0 7,4
Current account balance % of GDP 1,5 0,4 0,3 2,0 -0,8 -5,8 -3,6 -5,4 -5,3
General government balance % of GDP 1,5 0,9 0,3 -5,8 -5,1 -3,6 -4,2 -4,6 -4,3
Exchange rate CZK/EUR   26,3 25,6 25,7 26,4 25,6 24,6 24,2 24,6 24,5
Long-term interest rates % p.a. 1,0 2,0 1,5 1,1 1,9 4,3 4,6 4,5 5,2
Crude oil Brent USD/barrel 54 71 64 42 71 101 81 102 83
GDP in the euro area real growth in % 2,8 1,8 1,6 -6,3 5,3 3,3 0,4 3,3 0,3

Tables and Graphs

Preparation of the Macroeconomic Forecasts

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 year 2023 and for certain indicators an outlook for the 2 following years (i.e. until 2025). 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 Macroeconomic Forecast is based on data known as of 13 January 2023.

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