Macroeconomic Forecast - July 2015

Department 37 – Economic Policy
Department 37 – Economic Policy


  • Macroeconomic Forecast
  • Statistics

ISSN 1804‐7971

Summary of and Risks to the Forecast


The Czech economy is growing rapidly. Real GDP recorded enormous QoQ growth of 2.5%. As in the fourth quarter of 2014, however, GDP growth was affected by the legal limit on vending tobacco products with old tax stamp (in the fourth quarter, the limit weighed on GDP growth). Given the volatility of GDP due to the changes in law, gross value added is a much more suitable indicator for assessing the course the economy.

Real gross value added increased by 1.3% QoQ in the first quarter of 2015, marking the highest increase since the fourth quarter of 2007. Gross value added rose in almost all sections of the economy, but most notably (just like in the previous quarter) in manufacturing - by 2.6%.

Economic growth was driven exclusively by domestic demand. Consumption of households and the government, as well as gross capital formation, increased in YoY terms. Exceptionally high contribution of change in inventories (including the stock of unfinished infrastructure projects) was due not only to restocking of the aforementioned tax stamps, but also to the ongoing upturn. In foreign trade, growth of the main trading partners' economies and increased imports, which reflect faster growth of domestic demand and high import content of Czech exports, offset each other.

Other basic macroeconomic indicators confirm the good state of the economy. Households continue to benefit from very low inflation. On the labour market, employment is increasing rapidly and unemployment is falling. Current account of the balance of payments has been in surplus since 2014.

In 2015, the economy is stimulated by several one-off factors. Firstly, it is a positive supply shock resulting from the low price of oil - on average the koruna price of Brent crude oil should be a quarter lower in 2015 than it was in 2014. Another positive factor is fiscal stimulus, the extent of which is estimated around 0.4% of GDP. The effect of the expansive fiscal policy is further intensified by the drawdown of EU funds from the financial perspective 2007-2013, which can be utilized by the end of 2015.

The unexpectedly strong economic growth in the first quarter is the principal factor behind a sharp revision of the forecast for real GDP growth in 2015 from 2.7% to 3.9%.

Better performance of the real economy doesn't form a basis for a major revision of the forecast for tax revenues. This is due to the fact that tax revenues are mostly determined by nominal aggregates. Compared with the previous Forecast, the forecast for nominal GDP growth has been revised only marginally (from 4.7% to 4.9%).

As far as individual expenditure components are concerned, gross fixed capital formation and change in inventories, which are tax ineffective, were subject to the biggest upward revisions. The greatest direct impact on tax revenues has nominal consumption and nominal wage bill. The forecast for these aggregates was changed only marginally.

The aforementioned factors should subside in 2016 and economic growth should reflect normal conditions and potential of the Czech economy.

Given that the legislation (that limits vending tobacco products with old tax stamps) is now anchored, extreme fluctuations in revenues from excise tax should not repeat. The anticipated higher price of oil, through its effect on the costs of firms, will have a proinflationary impact, just like the widening positive output gap that will increase the pressure on wage growth.

Fiscal policy will be marginally anticyclical, oriented at the reduction of the general government deficit. Completion of the EU projects financed from the previous financial perspective (2007-2013) and a slower start of drawdown from the new financial perspective 2014-2020 will weigh on growth of investment.

For these reasons, the forecast for real GDP growth in 2016 remains unchanged at 2.5%.

In our opinion, risks to the Forecast are tilted to the downside, especially due to the risks that we see in the external environment of the Czech economy.

The uncertainty related to the course of the Chinese economy, which could lead to a slowdown of European exports to this region, is a risk to the development of global trade. Continued tension in Ukraine or instability in the Middle East and Northern Africa, which could influence the developments on oil and natural gas markets, are other risks to the global economy. The situation of Greece, even though it is going through rather dramatic developments, should not have a significant direct impact on the Czech economy.

In the Czech economy, pressure on the exchange rate to appreciate below 27 CZK/EUR can emerge. However, the tools the CNB has are sufficient to prevent excessive appreciation.


2010 2011 2012 2013 2014 2015 2016 2015 2016
Current forecast Previous forecast
Table: Main Macroeconomic Indicators
Gross domestic product bill. CZK 3 954 4 023 4 042 4 077 4 261 4 469 4 647 4 467 4 644
Gross domestic product growth in %, 2,3 2,0 -0,9 -0,5 2,0 3,9 2,5 2,7 2,5
Consumption of households growth in %, 1,0 0,3 -1,5 0,7 1,5 2,9 2,4 2,8 2,3
Consumption of government growth in %, 0,4 -3,0 -1,8 2,3 1,8 2,0 1,6 1,7 1,6
Gross fixed capital formation growth in %, 1,3 1,1 -3,2 -2,7 2,0 6,4 3,1 5,3 4,2
Contr. of foreign trade to GDP growth p.p., 0,5 1,9 1,3 0,0 -0,2 -0,4 0,3 -0,3 0,0
Contr. of increase in stocks to GDP growth p.p., 0,8 0,2 -0,2 -0,6 0,6 0,9 -0,1 0,0 0,0
GDP deflator growth in % -1,5 -0,2 1,4 1,4 2,5 1,0 1,5 1,9 1,4
Average inflation rate % 1,5 1,9 3,3 1,4 0,4 0,5 1,5 0,3 1,5
Employment (LFS) growth in % -1,0 0,4 0,4 1,0 0,8 1,0 0,2 0,7 0,2
Unemployment rate (LFS) average in % 7,3 6,7 7,0 7,0 6,1 5,7 5,5 5,7 5,5
Wage bill (domestic concept) growth in %, 0,6 2,2 2,5 0,4 1,9 4,2 4,1 4,0 4,1
Current account balance % of GDP -3,6 -2,1 -1,6 -0,5 0,6 0,5 0,2 1,3 0,9
General government balance % of GDP -4,4 -2,7 -3,9 -1,2 -2,0 -1,9 -1,2 -1,9 .
Exchange rate CZK/EUR   25,3 24,6 25,1 26,0 27,5 27,5 27,5 27,5 27,5
Long-term interest rates % p.a. 3,7 3,7 2,8 2,1 1,6 0,8 1,3 0,6 0,8
Crude oil Brent USD/barrel 80 111 112 109 99 61 68 60 68
GDP in Eurozone (EA12) growth in %, 2,0 1,6 -0,8 -0,4 0,8 1,4 1,8 1,4 1,8

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: 29.07.2015


  • The Macroeconomic Forecast is prepared by the Financial Policy Department of the Czech Ministry of Finance on a quarterly basis. It contains a forecast for the current and following years (i.e. until 2016) and for certain indicators an outlook for another 2 years (i.e. until 2018). As a rule, it is published in the second half of the first month of each quarter.
  • 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 7 July 2015.