Macroeconomic Forecast - July 2017

Department 37 – Economic Policy
Department 37 – Economic Policy


  • Macroeconomic Forecast
  • Statistics

ISSN 2533-5588

Summary of the Forecast

After several years of weak growth signs of improvement begin to emerge in the global economy. Both world trade and manufacturing are growing and private sector confidence indicators have strengthened significantly. However, economic-policy uncertainty or imbalances and vulnerability in financial markets have a negative effect.

Under these conditions a slight acceleration in global economic growth is forecasted for this and the next year. This should be helped by a further expansion in world trade, greater investment intensity and improved situation of some commodity exporters. Price pressures in labour and product markets are still low from the global perspective. Under the assumption that commodity prices don’t strengthen too much, inflation can be expected to remain subdued.

The Czech economy benefits from favourable internal as well as external conditions. Compared with the previous quarter, economic growth unexpectedly accelerated strongly to 1.5% in the first quarter of 2017. In a YoY comparison real GDP increased by 4.0%, helped also by a higher number of working days.

With the exception of change in inventories and valuables all expenditure components contributed to this result. Private consumption was traditionally robust, having increased by 3.5% YoY. Growth of consumption reflected not only high dynamics of both employment and wages, but also decreasing savings rate due to low interest rates and unusually high level of consumer confidence.

Developments in foreign trade, which is supported by growing foreign demand for products of automotive industry, contributed to economic growth to the same extent (1.6 pp). Having decreased in 2016, investment in fixed capital returned to growth, rising by 2.2% YoY. Private investment continued to grow, while investment of the general government sector also increased, though only in nominal terms. Increase in general government consumption of 2.8% also contributed to the strong economic growth.

Confidence indicators, purchasing managers’ indexes, production in industry and construction as well as retail sales all imply that favourable developments will continue in the upcoming part of 2017.

Based on the dynamics of wages that reflect low unemployment rate, high participation rate and still increasing job vacancy rate, growth of consumption of households should accelerate in the forecast horizon to the year 2018. Household consumption will also be supported by a decrease in tax burden on families with children and by an increase in social benefits. Investment should be stimulated not only by money from European Structural and Investment Funds, but also by decreasing relative price of capital to labour amid low interest rates.

Improvement in the state of both the Czech economy and external environment leads to an increase in the forecast for real GDP growth in 2017 from 2.5% to 3.1%, and in 2018 from 2.5% to 2.9%.

There was a strong acceleration in YoY growth of consumer prices above the inflation target of the Czech National Bank at the turn of the years 2016 and 2017. Going forward, price increases should slow down, as pro-inflationary effects of rising wages and positive output gap and anti-inflationary effects resulting from tightening of monetary conditions, especially in the exchange rate component, should offset each other. Moreover, we assume a smaller increase in the price of oil compared with the April forecast.

This leads to a slight decrease in the forecast for the average inflation rate in 2017 from 2.4% to 2.2%, and in 2018 from 1.7% to 1.6%.

On the labour market, the economic boom causes persistent increases in the demand for labour. High growth of employment, which has been exceeding 1% since the end of 2014, gradually depletes unutilized resources. Seasonally adjusted unemployment rate (in an internationally comparable methodology) reached 3.0% in May 2017, being the lowest in the whole EU since the beginning of 2016. The increase in participation (use of people outside the labour force) supported by demographic factors and rising statutory retirement age has also its limits. Lack of employees is becoming a barrier for further extensive growth of production.

Thanks to the aforementioned factors and a bigger-than-estimated decrease, the forecast for unemployment rate in 2017 and 2018 is improved slightly from 3.4% to 3.2% and from 3.2% to 2.9%, respectively. At this level, unemployment has only very limited space to decline further.

The current account of the balance of payments reached a surplus of 0.8% of GDP in the first quarter of 2017. Surpluses on the balance of goods and services are apparently exceeding the deficit of primary income, which is mostly influenced by an outflow of income from foreign direct investment in the form of dividends and reinvested earnings.

Higher foreign demand and the expected smaller increase in the price of oil lead to an upward revision of the forecast for the surplus on the current account of the balance of payments. The forecast for 2017 is increased from 0.4% of GDP to 0.7% of GDP, and the forecast for 2018 from 0.5% of GDP to 0.8% of GDP.

For the first time in history of the Czech Republic, the balance of the general government sector reached a surplus that amounted to 0.6% of GDP in 2016. This result was achieved due primarily to a 1.1 pp improvement in the structural balance. Despite growth of compensation of employees and social benefits, the balance of the general government sector was in a moderate surplus of 0.2% of GDP in the first quarter of this year, driven by the dynamics of tax revenues. For the time being the forecast for the general government sector surplus in 2017 remains unchanged at 0.4% of GDP. Available data on cash collection at the level of the state budget as well as of local governments and health insurance companies point to achieving a positive balance this year.



Main Macroeconomic Indicators
  2012 2013 2014 2015 2016 2017 2018 2017 2018
Current forecast Previous forecast
Gross domestic product bill. CZK 4 060 4 098 4 314 4 596 4 773 4 993 5 234 4 889 5 103
Gross domestic product growth in %, -0,8 -0,5 2,7 5,3 2,6 3,1 2,9 2,5 2,5
Consumption of households growth in %, -1,2 0,5 1,8 3,7 3,6 2,9 3,1 2,4 2,7
Consumption of government growth in %, -2,0 2,5 1,1 1,9 2,0 1,9 1,7 1,7 1,5
Gross fixed capital formation growth in %, -3,1 -2,5 3,9 10,2 -2,3 3,8 3,5 3,8 3,0
Net exports contr. to real GDP growth, pp 1,3 0,1 -0,5 -0,2 1,2 0,6 0,2 0,2 0,2
Change in inventories contr. to real GDP growth, pp -0,2 -0,7 1,1 0,8 0,0 -0,1 0,0 0,0 0,0
GDP deflator growth in % 1,5 1,4 2,5 1,2 1,2 1,4 1,8 1,1 1,8
Average inflation rate % 3,3 1,4 0,4 0,3 0,7 2,2 1,6 2,4 1,7
Employment (LFS) growth in % 0,4 1,0 0,8 1,4 1,9 1,4 0,4 1,1 0,3
Unemployment rate (LFS) average in % 7,0 7,0 6,1 5,1 4,0 3,2 2,9 3,4 3,3
Wage bill (domestic concept) growth in %, 2,6 0,5 3,6 4,8 5,8 6,1 5,6 5,7 4,8
Current account balance % of GDP -1,6 -0,5 0,2 0,2 1,1 0,7 0,8 0,4 0,5
General government balance % of GDP -3,9 -1,2 -1,9 -0,6 0,6 0,4 . 0,4 .
Exchange rate CZK/EUR   25,1 26,0 27,5 27,3 27,0 26,4 25,6 26,9 26,3
Long-term interest rates % p.a. 2,8 2,1 1,6 0,6 0,4 0,9 1,5 0,9 1,5
Crude oil Brent USD/barrel 112 109 99 52 44 49 50 56 57
GDP in Eurozone growth in %, -0,9 -0,3 1,2 2,0 1,8 1,8 1,8 1,5 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: 31.7.2017


  • The Macroeconomic Forecast is prepared by the Economic Policy Department of the Czech Ministry of Finance. It contains a forecast for the current and the following year (i.e. until 2018) and for certain indicators an outlook for another 2 years (i.e. until 2020). It is published on a quarterly basis (usually in January, April, July and November).
  • 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 July 2017.