Macroeconomic Forecast - January 2021

Department 37 – Economic Policy
Department 37 – Economic Policy


  • Macroeconomic Forecast
  • Statistics

ISSN 2533-5588

Introduction and Summary

The pandemic triggered by a new type of coronavirus, the measures taken to tackle the epidemic, and their knock-on effects caused deep and synchronous downturn of the global economy in 2020. Its extent is unprecedented in the period after the Second World War. Economic policy in all the countries affected responded by a sharp easing and by adopting massive fiscal and monetary stimuli, which limited the pandemic’s impact on short-term growth. These measures also helped to minimise the repercussions for long-term growth.

This year should be characterised by an upswing in global economic activity. However, the recovery in most countries will evidently not be strong enough to offset the 2020 slump. The forecast for this year is saddled with enormous uncertainty, with plainly downside risks. The biggest include global developments of the pandemic with the possibility that economic activity is further restrained, delays in the process of inoculating the public, long-term effects on potential output, and, last but not least, the risk of financial instability. At national level, sensitive decisions will have to be made between stimulating the economy and increasing the debt.

In the short lull between the first and second coronavirus waves, the Czech economy rebounded strongly. In Q3 2020, real gross domestic product adjusted for seasonal and calendar effects surged 6.9% QoQ. As a result, its year-on-year slump softened from 10.8% in the second quarter to 5.0% in the third quarter.

On the use side, the most significant factor was external trade, which contributed +1.2 pp to the year-on-year GDP growth. This can be attributed to renewed output growth in the export – and especially automotive – industry. The record trade surpluses were also boosted by very weak investment activity among domestic companies (reflected in lower imports of capital goods) and the low price of oil.

Within components of domestic use, household consumption contracted by 3.9% YoY, squeezed by a reduction in real wages and salaries and a persistently high savings rate that can be attributed to heightened uncertainty about further developments. General government consumption was the only component of domestic use to grow, rising by 0.4%.

Gross fixed capital formation plunged by 11.5%. The decline in investment was synchronous across all categories. Investments in vehicles, down by almost a quarter, were hardest hit. From a sectoral perspective, the slump was almost exclusively due to the private sector.

In the macroeconomic forecast, we work on the assumption that the vaccination process will gradually quell the epidemic. Then, starting in Q2 2021, economic activity should slowly recover and gradually offset the previous shock to aggregate demand and supply.

We estimate that economic output went down by 6.1% in 2020 as a whole. There was a steep decline in probably all areas of domestic use, with the exception of general government final consumption expenditure. Economic growth in 2021 could reach 3.1% on the back of the projected improvement in the epidemic situation following the COVID-19 vaccination roll-out and the forecast recovery abroad.

In Q4 2020, the year-on-year growth of consumer prices visibly slackened and returned to under the upper 3% boundary of the tolerance band set for the Czech National Bank’s inflation target. It appears that the landscape characterised by a fall in consumer demand is slowly beginning to prevail over frictions on the supply side of the economy. At the same time, food price growth has undeniably eased. The average inflation rate in 2020 was 3.2%. Oil prices aside, major pro-inflationary factors should be absent in 2021. Falling unit labour costs and the persistent negative output gap should ease inflation to 1.9%.

The labour market is largely under the sway of fiscal stimulus measures aimed at maintaining employment levels as much as possible. Consequently, while there has been a certain increase in unemployment, it is much lower than would be normal for the current cyclical position of the Czech economy. The unemployment rate last year, as measured by the Labour Force Survey, might have reached 2.6%. Delayed effects of the economic downturn and a gradual lifting of measures designed to keep employment levels high should push the unemployment rate up to 3.3% in 2021.

Somewhat paradoxically, the dismal economic situation is increasing the current account surplus. The reduced profitability of foreign-controlled businesses is reflected in a significant, albeit probably only temporary, improvement in the primary income deficit. The trade balance in the second half of 2020 benefited from a rise in vehicle exports, a decline in imports of capital goods, and the low price of oil. The current account surplus might have reached 3.6% of GDP in 2020. For 2021, we project a surplus of 1.4% of GDP.

Public finances have shouldered much of the costs of the epidemic. However, the downturn in economic activity not only resulted in a decline or loss in the momentum of tax revenues, but was also accompanied by spending to combat the spread of the epidemic, strengthen the public health system, and mitigate the economic and social impacts. We estimate that, in 2020, the general government balance had a deficit amounting to 5.8% of GDP, with debt increasing to 38.3% of GDP. In 2021, we forecast a deficit of 6.6% of GDP, which will deepen the relative amount of debt to 43.3% of GDP.


Main Macroeconomic Indicators
2015 2016 2017 2018 2019 2020 2021 2020 2021
Current forecast Previous forecast
Nominal GDP bill. CZK 4 625 4 797 5 111 5 410 5 749 5 613 5 874 5 561 5 860
  nominal growth in % 6,4 3,7 6,5 5,8 6,3 -2,4 4,7 -3,3 5,4
Gross domestic product real growth in % 5,4 2,5 5,2 3,2 2,3 -6,1 3,1 -6,6 3,9
Consumption of households real growth in % 3,9 3,8 4,0 3,5 3,0 -5,1 3,3 -5,0 2,2
Consumption of government real growth in % 1,8 2,5 1,8 3,8 2,2 2,1 2,9 3,8 2,9
Gross fixed capital formation real growth in % 9,7 -3,0 4,9 10,0 2,3 -8,2 3,8 -7,5 3,0
Contribution of net exports pp -0,2 1,4 1,2 -1,2 0,0 -0,6 -0,1 -1,7 0,9
Contrib. of change in inventories pp 0,9 -0,3 0,5 -0,5 -0,2 -1,4 0,0 -1,3 0,6
GDP deflator growth in % 1,0 1,1 1,3 2,6 3,9 4,0 1,5 3,6 1,4
Average inflation rate % 0,3 0,7 2,5 2,1 2,8 3,2 1,9 3,2 1,9
Employment (LFS) growth in % 1,4 1,9 1,6 1,4 0,2 -1,1 -0,6 -1,2 -0,7
Unemployment rate (LFS) average in % 5,1 4,0 2,9 2,2 2,0 2,6 3,3 2,6 3,4
Wage bill (domestic concept) growth in % 5,0 5,7 9,2 9,6 6,7 0,2 1,2 -1,9 0,8
Current account balance % of GDP 0,4 1,8 1,5 0,4 -0,3 3,6 1,4 0,3 0,4
General government balance % of GDP -0,6 0,7 1,5 0,9 0,3 -5,8 -6,6 -6,4 -4,9
Exchange rate CZK/EUR   27,3 27,0 26,3 25,6 25,7 26,4 26,1 26,3 25,8
Long-term interest rates % p.a. 0,6 0,4 1,0 2,0 1,5 1,1 1,2 1,1 0,9
Crude oil Brent USD/barrel 52 44 54 71 64 42 51 42 48
GDP in the euro area real growth in % 1,9 1,8 2,7 1,9 1,3 -7,3 3,6 -9,0 5,4


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: 29.01.2021


  • The Macroeconomic Forecast is prepared by the Economic Policy Department of the Czech Ministry of Finance. It contains a forecast for the year 2021 and for certain indicators an outlook for 2 following years (i.e. until 2023). It is published on a quarterly basis (usually in January, April, July and November).
  • Any comments or suggestions that would help us improve the quality of our publication and closer satisfy the needs of its users are welcome. Please send any comments to the following email address: macroeconomic.forecast(at)
  • Cut-off Date for Data Sources:
    The forecast is based on the data known as of 13 January 2021; the cut-off date for selected forecast assumptions was 6 January 2021.