Macroeconomic Forecast - January 2019

Dept 37 - Economic Policy
Dept 37 - Economic Policy


  • Macroeconomic Forecast
  • Statistics

ISSN 2533-5588

Summary of the Forecast

The cyclical recovery in advanced economies is past its peak. While their growth was, according to the IMF data, 2.4% in 2018, which was the highest since 2010, it should slow down to 2.1% in 2019. The world trade growth is slowing down even more considerably, which is partly due to escalating tensions in global trade relations. Increasing political risks affect economic sentiment and may further undermine economic growth and its sustainability in the medium term. That is also confirmed by declining confidence indicators.

A specific problem is the issue of the United Kingdom's withdrawal from the European Union. It is still unclear and unpredictable under what conditions, when and if it will happen at all. Although the baseline scenario of the macroeconomic forecast is based on the assumption that trade relations between the European Union and the United Kingdom will not be cut, the forecast also includes a box showing the impacts of a "hard Brexit" on the Czech economy.

The growth of real gross domestic product in the Czech Republic remained stable (adjusted for seasonal and calendar effects) at 0.6% QoQ and 2.4% YoY in Q3 2018.

In the year-on-year perspective, the most dynamic component of domestic use was investment in fixed capital, which grew by 9.0%. Within total investments, non-residential construction investments as well as acquisition of transport equipment achieved a double-digit growth.

In the sectoral perspective, the general government sector's investment activity accelerated significantly. The almost 40% increase was driven by domestic investment as well as projects co-funded from the European Structural and Investment Funds. Private investment also showed high dynamics of almost 5%.

Household consumption moderated slightly to 3.1%. Under conditions of high dynamics of the wage bill growth, consumption reflected not only higher consumer inflation but also a continued increase in the savings rate. Consumption of the general government sector, which was driven mainly by intermediate consumption, increased by 5.2%.

In Q3 2018, the contribution of foreign trade was negative; it took 1.0 pp off the economic growth. This reflected not only an increase in imports, which was due to high import intensity of investment, but also - on the side of exports - a slowdown in the growth of export markets. There was an unexpected high increase in imports of services in the area of research and consultancy.

We expect that in aggregate real GDP increased by 2.8% in 2018. The forecast for growth in 2019 is slightly reduced from 2.9% to 2.5%. The most important growth factor should be household consumption, which will reflect the still robust wage dynamics at an extremely low unemployment rate, and a sharp increase in pensions. Investment in fixed capital and government consumption should contribute to the growth, although to a lesser extent than in 2018, whereas the contribution of foreign trade should remain negative. In 2020, we expect a slight slowdown in the economic growth to 2.4%.

Since the beginning of 2017, the year-on-year growth in consumer prices has mostly hovered in the upper half of the tolerance band of the Czech National Bank's 2% inflation target. It should remain in the tolerance band, though due to a slump in the price of oil at a lower level than it was indicated in the previous forecast. Pro-inflationary effects of the development of wages and salaries and of the positive output gap should continue to act but with a gradually decreasing intensity. The average inflation rate in 2018 was 2.1%. The forecast for 2019 is decreased from 2.3% to 2.1%, and the inflation in 2020 is expected at 1.6%.

Due to the limits of the labour market, the employment growth has gradually been slowing down. In Q3 2018 it dropped below the 1% threshold for the first time since the end of 2014. Lack of employees is a primary barrier to a further extensive production growth, which should motivate companies to invest in raising labour productivity. The room for further decrease in unemployment appears to be almost exhausted. In connection with current developments, however, we are decreasing the forecast for the unemployment rate in 2019 from 2.3% to 2.2%, and the same value can also be expected in 2020.

As regards the current account of the balance of payments, the positive balance of goods has gradually been decreasing as a result of higher domestic demand for imports influenced by the increase in consumption and investment. This factor is being accompanied by the impact of uncertainties in world trade. The remaining items of the current account should more or less stagnate or only slightly improve. The result should be a relatively stable small surplus of 0.3% of GDP in 2019 and 0.2% of GDP in 2020.

The estimate for the general government balance in 2018 remains unchanged at 1.6% of GDP. Long-lasting surplus budget performance of local governments and health insurance companies as well as a surplus cash balance of the state budget, which recorded the second best result since 1996, all contributed positively to the overall outcome. The forecast for the general government surplus in 2019 remains at 1.0% of GDP. We estimate that the general government debt decreased to 32.9% of GDP at the end of 2018, and that it should continue in that trend also in 2019, declining to 31.7% of GDP.


Main Macroeconomic Indicators
  2014 2015 2016 2017 2018 2019 2020 2018 2019
Current forecast Previous forecast
Gross domestic product bill. CZK 4 314 4 596 4 768 5 047 5 313 5 590 5 823 5 296 5 568
Gross domestic product growth in %, 2,7 5,3 2,5 4,4 2,8 2,5 2,4 3,0 2,9
Consumption of households growth in %, 1,8 3,7 3,6 4,3 3,5 3,3 3,0 3,6 3,6
Consumption of government growth in %, 1,1 1,9 2,7 1,3 3,8 2,1 1,9 2,5 2,1
Gross fixed capital formation growth in %, 3,9 10,2 -3,1 3,7 8,8 3,1 2,7 7,8 3,2
Net exports contr. to GDP growth, pp -0,5 -0,2 1,4 1,1 -0,6 -0,3 -0,1 -0,4 0,0
Change in inventories contr. to GDP growth, pp 1,1 0,8 -0,4 0,1 -1,1 0,0 0,0 -0,8 0,0
GDP deflator growth in % 2,5 1,2 1,3 1,4 2,4 2,6 1,7 1,9 2,2
Average inflation rate % 0,4 0,3 0,7 2,5 2,1 2,1 1,6 2,2 2,3
Employment (LFS) growth in % 0,8 1,4 1,9 1,6 1,3 0,3 0,2 1,3 0,2
Unemployment rate (LFS) average in % 6,1 5,1 4,0 2,9 2,3 2,2 2,2 2,3 2,3
Wage bill (domestic concept) growth in %, 3,6 4,8 5,7 8,3 9,6 7,7 6,3 9,5 8,4
Current account balance % of GDP 0,2 0,2 1,6 1,1 0,3 0,3 0,2 0,4 0,4
General government balance % of GDP -2,1 -0,6 0,7 1,5 1,6 1,0 . 1,6 1,0
Exchange rate CZK/EUR   27,5 27,3 27,0 26,3 25,6 25,5 25,1 25,5 24,9
Long-term interest rates % p.a. 1,4 0,6 0,4 1,0 2,0 2,7 3,0 2,1 2,6
Crude oil Brent USD/barrel 99 52 44 54 71 56 57 74 77
GDP in Eurozone growth in %, 1,4 2,1 2,0 2,4 1,9 1,4 1,5 2,0 1,7


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: 31.1.2019


  • 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 2020) and for certain indicators an outlook for another 2 years (i.e. until 2022). 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 15 January 2019.