Macroeconomic Forecast - January 2016

Dept 37 - Economic Policy
Dept 37 - Economic Policy


  • Macroeconomic Forecast
  • Statistics

ISSN 1804‐7971

Summary of and Risks to the Forecast

Dynamic growth of the Czech economy continues. Real GDP increased by 0.7% QoQ in the third quarter of 2015. In YoY terms, growth reached 4.1%, exceeding 4% for the third quarter in a row. Real gross value added even increased by 1.2% QoQ in the third quarter of 2015. Growth structure was more balanced this time, with manufacturing, construction and the section of trade and transportation making the biggest contributions.

Economic growth remains driven exclusively by domestic demand. Its most quickly increasing component is gross fixed capital formation where an effort to maximize the use of the EU funds manifested itself with strong YoY growth of 6.8%. There was a dynamic increase in consumption of both the government (by 4.4%) and households (by 2.7%). In foreign trade, the stable growth of the CR’s main trading partners’ economies and increased imports, which reflect the accelerated growth of domestic demand and high import content of Czech exports, roughly offset each other. Strong economic growth is seen in a balanced macroeconomic environment.

The inflation rate reached only 0.3% in 2015, marking the lowest figure since 2003 and the second lowest in the history of the independent Czech Republic. Low inflation is mainly caused by a deep decline in world prices of mineral fuels and generally low inflation on the global scale.

On the labour market, the economic upswing is reflected in the favourable development of employment, the YoY growth rate of which has now exceeded 1% for four quarters in a row, and unemployment. The unemployment rate (LFS) decreased to 4.8% in the third quarter of 2015, marking the second lowest value in the EU, after Germany (4.4%).

The surplus on the current account of the balance of payments probably reached 1.2% of GDP in 2015, which would be the highest value in the history of the independent Czech Republic.

Evaluation of the known facts has led to a minor revision to the estimate for real GDP growth in 2015 from 4.5% to 4.6%.

However, many of the causes of the high growth of the Czech economy in 2015 can be identified as one-off or temporary factors. They mainly concern the impulse in the form of the utilisation of the EU funds from the programming period 2007–2013, which could only be used by the end of 2015. Preliminary data indicate that the final result was better than assumed in the October Forecast. We estimate that the contribution of this factor to GDP growth was 0.8 pp. At the beginning of 2015, GDP growth was increased by another one-off factor, namely by transferring a part of accrual revenue from excise duty on tobacco products from 2014, resulting from the restricted time validity of tobacco stamps (the contribution to GDP growth of approximately 0.2 pp). These factors increased GDP growth in 2015 by approximately 1 pp and they will decrease it to a similar extent this year due to higher comparison base. Last but not least, a positive supply shock in the form of a slump in the koruna price of oil had a favourable impact on economic growth in 2015. Thanks to this factor, real GDP growth was probably 0.9 pp higher.

Low price of oil should support the economy also in this year, though to a much smaller extent – its contribution to GDP growth is estimated at 0.3 pp, as the koruna price of oil could start increasing (in YoY terms) in the second half of the year. However, the results of model simulations show that if the price of oil remained, until the end of 2017, at the levels of the beginning of this year, economic growth in this and the next year could be higher by additional 0.2–0.3 pp.

The forecast for real GDP growth in 2016 remains at 2.7%. We expect economic growth of 2.6% in 2017.

As regards the expected tax revenues, it can be stated that the forecast of the most important tax bases, i.e. the nominal wage bill, nominal consumption of households and net operating surplus, remains virtually unchanged in the whole forecasting period.

The slowdown in China’s economic growth, which will most probably continue in the future, represents a major risk for the further development of world trade. However, this factor should not be crucial for the Czech Republic, despite the fact that the interconnectedness of the Czech and the Chinese economy is higher than suggested by data on their mutual foreign trade, due to their involvement in the global supply chains. A risk is also the continued increased volatility and uncertainty on the financial markets, to which negative data on the development of the second biggest world economy, in addition to an ongoing decrease in commodity prices (partially due to the development in China), has recently made a significant contribution. A specific problem in this connection is the question of information content of the Chinese official statistics.

Another unfavourable factor is geopolitical risks. Conflicts in the Middle East and Northern Africa caused a deep migration crisis, the economic impact of which on the individual EU states cannot be estimated yet. Provided that the number of applicants for asylum in the Czech Republic does not increase, direct impacts on the Czech economy should be negligible.

With respect to the structure of the Czech economy and strong trade interconnectedness with Germany, a negative risk could also be 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.

A positive risk for economic growth is, on the contrary, the possibility of the continuation of the current low prices of commodities


2011 2012 2013 2014 2015 2016 2017 2015 2016
Current forecast Previous forecast
Table: Main Macroeconomic Indicators
Gross domestic product bill. CZK 4 023 4 042 4 077 4 261 4 495 4 657 4 831 4 482 4 642
Gross domestic product growth in %, 2,0 -0,9 -0,5 2,0 4,6 2,7 2,6 4,5 2,7
Consumption of households growth in %, 0,3 -1,5 0,7 1,5 2,9 3,1 2,6 2,9 2,5
Consumption of government growth in %, -3,0 -1,8 2,3 1,8 3,2 2,1 1,5 2,2 2,0
Gross fixed capital formation growth in %, 1,1 -3,2 -2,7 2,0 8,3 1,5 3,3 8,2 2,9
Contr. of foreign trade to GDP growth p.p., 1,9 1,3 0,0 -0,2 -0,4 0,5 0,3 -0,2 0,3
Contr. of increase in stocks to GDP growth p.p., 0,2 -0,2 -0,6 0,6 1,0 0,0 0,0 0,7 0,0
GDP deflator growth in % -0,2 1,4 1,4 2,5 0,8 0,8 1,1 0,7 0,9
Average inflation rate % 1,9 3,3 1,4 0,4 0,3 0,5 1,6 0,4 1,1
Employment (LFS) growth in % 0,4 0,4 1,0 0,8 1,3 0,3 0,1 1,3 0,3
Unemployment rate (LFS) average in % 6,7 7,0 7,0 6,1 5,1 4,7 4,6 5,2 4,9
Wage bill (domestic concept) growth in %, 2,2 2,5 0,4 1,9 4,1 4,5 4,6 4,2 4,3
Current account balance % of GDP -2,1 -1,6 -0,5 0,6 1,2 1,2 0,6 0,7 0,2
General government balance % of GDP -2,7 -4,0 -1,3 -1,9 -1,1 . . -1,9 .
Exchange rate CZK/EUR   24,6 25,1 26,0 27,5 27,3 27,0 26,7 27,3 27,1
Long-term interest rates % p.a. 3,7 2,8 2,1 1,6 0,6 0,7 1,0 0,7 1,2
Crude oil Brent USD/barrel 111 112 109 99 52 44 54 54 59
GDP in Eurozone (EA12) growth in %, 1,6 -0,9 -0,3 0,9 1,4 1,5 1,6 1,4 1,6

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: 29.1.2016


  • The Macroeconomic Forecast is prepared by the Economic Policy Department (as of 1 January 2016, Financial Policy Department was renamed to Economic Policy Department) of the Czech Ministry of Finance on a quarterly basis. It contains a forecast for the current and the following year (i.e. until 2017) and for certain indicators an outlook for another 2 years (i.e. until 2019). 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 13 January 2016.