Macroeconomic Forecast - October 2015

Department 37 – Economic Policy
Department 37 – Economic Policy


  • Macroeconomic Forecast
  • Statistics

ISSN 1804‐7971

Summary of and Risks to the Forecast

The dynamic growth of the Czech economy continues. Real GDP increased by 1.1% QoQ in the second quarter of 2015. YoY growth reached 4.6%, marking the highest increase since the fourth quarter of 2007.

Real gross value added increased by 0.9% QoQ in the second quarter of 2015. It rose in all sections of the economy, with the highest contribution coming from manufacturing.

Economic growth remains driven exclusively by domestic demand. The most dynamic item of use is gross fixed capital formation where efforts for the maximal use of the EU funds manifested itself with strong YoY growth of 7.4%. In addition, household consumption is accelerating under the conditions of low inflation and improving situation on the labour market, and government consumption growth is not negligible either. In foreign trade, growth of the main trading partners’ economies and increased imports, which reflect the growth of domestic demand and the high import content of Czech exports, offset each other.

Other basic macroeconomic indicators also confirm the favourable state of the Czech economy. Very low inflation is mainly caused by a deep decline of mineral fuel prices and generally low inflation on the global scale. On the labour market, the good state of the economy is reflected in dynamically growing employment and decreasing unemployment. An increase in the surplus on the current account of the balance of payments in the second quarter of 2015 is also positive.

However, many of the causes of robust growth of the Czech economy can be identified as one-off factors, the effect of which is limited only to this year. It mainly concerns utilization of the EU funds from the programming period 2007–2013, which can only be used by the end of 2015. Another positive factor is fiscal stimulation (partially also related to utilization of the EU funds), the extent of which we estimate to be approx. 0.8% of GDP. Positive supply shock in the form of a decline in the world crude oil prices is also estimated to be time-limited.

Strong economic growth in the second quarter of 2015 and positive outlook for the remaining part of the year have led to a further upward revision of the forecast for real GDP growth in 2015 from 3.9% to 4.5%.

In 2016, the aforementioned one-off factors should gradually disappear. The termination of financing of projects from the previous programming period and a slower start of drawdown from the new financial perspective 2014–2020 will reduce investment growth. Fiscal policy should be restrictive, focused on decreasing the general government sector deficit. World fuel prices should remain at a low level; however, their slight increase can already be expected in YoY terms. Economic growth in 2016 should thus reflect normal conditions and possibilities of the Czech economy.

In spite of that, the expected good state of the economy has resulted in an increase in the forecast of real GDP growth for 2016 from 2.5% to 2.7%.

However, better real economic development will probably not show itself in the nominal GDP level. The forecast for consumer inflation for 2015 and 2016 has been revised downwards. In addition, stagnation to worsening of the terms of trade can now be seen in foreign trade. The import prices of non-fuel commodities are growing probably due to the lagged reaction to the Czech currency depreciation, and export prices are decreasing. This will cause lower growth of the GDP deflator, nominal GDP and it could also influence companies’ profitability. Nevertheless, the forecast of development of the most important tax bases, i.e. nominal wage bill and nominal consumption of households, remains virtually unchanged.

We consider the forecast risks to be tilted to the downside, in particular due to risks in the external environment.

For world trade and the development on financial markets, they are not only uncertainties related to monetary policy in the USA (timing of the increase in monetary policy rates and the impact on emerging economies), but mainly the slowing of the Chinese economy and fears of its further continuation. However, this factor should not be crucial for the Czech Republic, despite the fact that the interconnectedness of the Czech and Chinese economies is higher than suggested by data on their mutual foreign trade, due to their involvement in the global supplier chains.

Another unfavourable factor is geopolitical risks. Instability in the Middle East and Northern Africa can influence the development on the oil and natural gas market; however, the return of the Iranian crude oil to the world markets could have an effect in the direction of a price decrease.

In addition, escalation of conflicts in this region caused a deep migration crisis, the economic impact of which on the individual EU states cannot be estimated yet. However, with regard to the low number of applicants for asylum in the Czech Republic, the direct impacts on the Czech economy should be negligible.

With respect to the Czech economy’s structure and strong trade interconnectedness with Germany, a negative risk is also the further development in the case regarding the emissions level of some diesel engines in the cars of the Volkswagen concern. However, for the time being we do not expect that the impact on the Czech Republic would be too significant from the macroeconomic perspective.

Last but not least, a risk for the Czech economy could be the continuation of more significant pressures on the appreciation of the Czech koruna exchange rate below 27 CZK/EUR. However, the CNB can intervene basically without limitation against these tendencies; moreover, for the time being the amount of foreign exchange reserves as a percentage of GDP is at a low level.



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 4 482 4 642 4 469 4 647
Gross domestic product growth in %, 2,3 2,0 -0,9 -0,5 2,0 4,5 2,7 3,9 2,5
Consumption of households growth in %, 1,0 0,3 -1,5 0,7 1,5 2,9 2,5 2,9 2,4
Consumption of government growth in %, 0,4 -3,0 -1,8 2,3 1,8 2,2 2,0 2,0 1,6
Gross fixed capital formation growth in %, 1,3 1,1 -3,2 -2,7 2,0 8,2 2,9 6,4 3,1
Contr. of foreign trade to GDP growth p.p., 0,5 1,9 1,3 0,0 -0,2 -0,2 0,3 -0,4 0,3
Contr. of increase in stocks to GDP growth p.p., 0,8 0,2 -0,2 -0,6 0,6 0,7 0,0 0,9 -0,1
GDP deflator growth in % -1,5 -0,2 1,4 1,4 2,5 0,7 0,9 1,0 1,5
Average inflation rate % 1,5 1,9 3,3 1,4 0,4 0,4 1,1 0,5 1,5
Employment (LFS) growth in % -1,0 0,4 0,4 1,0 0,8 1,3 0,3 1,0 0,2
Unemployment rate (LFS) average in % 7,3 6,7 7,0 7,0 6,1 5,2 4,9 5,7 5,5
Wage bill (domestic concept) growth in %, 0,6 2,2 2,5 0,4 1,9 4,2 4,3 4,2 4,1
Current account balance % of GDP -3,6 -2,1 -1,6 -0,5 0,6 0,7 0,2 0,5 0,2
General government balance % of GDP -4,4 -2,7 -4,0 -1,3 -1,9 -1,9 . -1,9 -1,2
Exchange rate CZK/EUR   25,3 24,6 25,1 26,0 27,5 27,3 27,1 27,5 27,5
Long-term interest rates % p.a. 3,7 3,7 2,8 2,1 1,6 0,7 1,2 0,8 1,3
Crude oil Brent USD/barrel 80 111 112 109 99 54 59 61 68
GDP in Eurozone (EA12) growth in %, 2,0 1,7 -0,8 -0,3 0,8 1,4 1,6 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: 30.10.2015


  • 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 12 October 2015.