Macroeconomic Forecast - April 2025
Summary of the Forecast
English version of the April Macroeconomic Forecast will be released in the week of 14 April.
Global economic growth continues to benefit from weakening inflation, which is boosting household consumption spending. In contrast, investment activity in a number of countries has been constrained by restrictive monetary policies combined with heightened geopolitical instability. Despite some improvement, problems in the real estate sector in China are also having a negative impact, but their impact is being mitigated by supportive fiscal and monetary measures.
Global economic activity has been hampered by uncertainties related to trade policy and other measures of the new US administration, resulting in a decline in consumer and business confidence. The macroeconomic forecast in the baseline scenario is based on the assumption of tariffs imposed on automobiles and their components, announced already on 26 March 2025, and on steel and aluminium. The universal tariffs on all imports of goods were announced by the US administration after the data cut-off date. However, their more permanent actual form, the questionable legal basis, the amount and structure of retaliatory measures by other countries, as well as their other dynamic effects are in question. Therefore, they are not part of the baseline scenario of the Macroeconomic Forecast, but the content of a special thematic chapter.
In Q4 2024, real gross domestic product of the Czech Republic, adjusted for seasonal and calendar effects, increased by 0.7% quarter-on-quarter.
For the full year 2024, GDP grew by 1.1%. Household consumption was supported by an increase in real disposable income, but the restrictive monetary policy stance and, to some extent, the consolidation package worked in the opposite direction. Investment activity declined due to persistent problems in euro area countries, a decline in housing construction and low capacity utilisation in industry. At the same time, the transition to the new financial perspective was reflected, especially in general government investment. The economy was noticeably slowed by the YoY decline in inventories. Export growth was held back by a decline in export markets, while export performance was positive. Weak domestic demand dynamics, especially for import-intensive investment, dampened import growth. The contribution of foreign trade thus remained positive last year.
Economic activity could increase by 2.0% in 2025, mainly thanks to an acceleration in household consumption, which will be stimulated by real earnings growth. To a lesser extent, gross capital formation and government consumption expenditure will also support economic growth. In 2026, GDP could grow by 2.4%, thanks to stronger investment momentum and accelerating economic growth in major trading partner countries.
Annual inflation had been slightly below 3% at the start of the year. Restrictive monetary policy would continue to ease inflationary pressures through interest rates this year. The expected fall in the dollar price of oil, a slight appreciation of the koruna and lower energy prices will also have an anti-inflationary effect. On the other hand, continued higher wage growth, increases in excise duties on tobacco products and alcohol, as well as increased price dynamics in services, including renewed growth in imputed rents, will be inflationary factors. The average inflation rate could reach 2.4% this year and fall slightly to 2.3% in 2026.
Labour market imbalances related to labour shortages continue to manifest themselves. Thus, despite the problems in the main industries, the unemployment rate could remain at 2.6% on average this year. It could fall slightly to 2.5% next year, thanks to the continued economic recovery. The persistent labour market frictions will not allow a significant slowdown in wage and salary growth. Real earnings are expected to increase appreciably this year and next.
The current account of the balance of payments ended with a surplus of 1.8% of GDP in Q4 2024. The significant year-on-year improvement in the external balance was mainly due to an increase in the goods surplus, driven by growth in motor vehicle exports and a decline in domestic investment activity. Meanwhile, domestic demand should continue to guide the current account. For this year, we expect the current account surplus to narrow to 0.7% of GDP on the back of stronger household consumption dynamics, while the positive balance will ease further to 0.1% of GDP in 2026 on the back of recovering investment activity.
The general government sector ended 2024 with a deficit of 2.2% of GDP. The deficit decreased by 1.5 pp as a result of the consolidation package, the end of measures related to the energy crisis and the partial economic recovery. The structural balance improved by 0,7 pp to -1.9 % of GDP. Last year, general government debt reached 43.6 % of GDP in a context of lower nominal GDP growth. This year, we expect the same outcome for general government, with debt expected to increase further to 44.5 % of GDP.
In aggregate, we consider the risks to the forecast to be skewed to the downside. A possible resurgence of problems in supply chains could dampen economic activity in some sectors of the economy and increase inflationary pressures, as could the introduction or increase of tariffs or other barriers to foreign trade. Given the significant trade linkages between the Czech and German economies, structural problems and weak economic growth in Germany are also risks to the forecast - however, ongoing changes in German budgetary policy, which will allow it to increase investment in defence and infrastructure, could have a positive effect.
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | 2024 | 2025 | ||
|---|---|---|---|---|---|---|---|---|---|---|
| Current forecast | Previous forecast | |||||||||
| Nominal GDP | bill. CZK | 5 828 | 6 308 | 7 050 | 7 619 | 8 011 | 8 391 | 8 787 | 8 007 | 8 431 |
| nominal growth in % | -1,0 | 8,2 | 11,8 | 8,1 | 5,1 | 4,7 | 4,7 | 5,1 | 5,3 | |
| Gross domestic product | real growth in % | -5,3 | 4,0 | 2,8 | -0,1 | 1,1 | 2,0 | 2,4 | 1,1 | 2,3 |
| Consumption of households | real growth in % | -6,4 | 4,2 | 0,5 | -2,8 | 2,2 | 3,6 | 3,2 | 1,8 | 3,4 |
| Consumption of government | real growth in % | 4,1 | 1,5 | 0,4 | 3,4 | 3,3 | 2,0 | 1,4 | 3,8 | 1,8 |
| Gross fixed capital formation | real growth in % | -4,8 | 6,7 | 6,3 | 2,5 | -1,2 | 0,7 | 3,1 | -0,1 | 2,8 |
| Contribution of net exports | pp | -0,6 | -2,8 | -0,3 | 2,6 | 0,7 | -1,0 | -0,5 | 0,7 | -1,3 |
| Contrib. of change in inventories | pp | -1,2 | 2,8 | 1,2 | -2,7 | -0,9 | 0,7 | 0,2 | -1,1 | 0,9 |
| GDP deflator | growth in % | 4,5 | 4,0 | 8,7 | 8,1 | 4,0 | 2,7 | 2,3 | 4,0 | 3,0 |
| Average inflation rate | % | 3,2 | 3,8 | 15,1 | 10,7 | 2,4 | 2,4 | 2,3 | 2,4 | 2,3 |
| Employment (national accounts) | growth in % | -2,3 | 1,0 | 1,0 | 1,0 | 0,3 | 0,2 | 0,1 | 0,3 | 0,2 |
| Unemployment rate (LFS) | average in % | 2,6 | 2,8 | 2,2 | 2,6 | 2,6 | 2,6 | 2,5 | 2,6 | 2,5 |
| Wage bill (domestic concept) | growth in % | 0,4 | 7,2 | 9,1 | 7,7 | 6,3 | 6,6 | 5,6 | 6,4 | 6,3 |
| Current account balance | % of GDP | 1,8 | -2,1 | -4,7 | -0,1 | 1,8 | 0,7 | 0,1 | 1,0 | -0,2 |
| General government balance | % of GDP | -5,6 | -5,0 | -3,1 | -3,8 | -2,2 | -2,2 | -2,0 | -2,8 | -2,3 |
| General government debt | % of GDP | 36,9 | 40,7 | 42,5 | 42,5 | 43,6 | 44,5 | 45,1 | 43,4 | 44,3 |
| Assumptions: | ||||||||||
| Exchange rate CZK/EUR | 26,4 | 25,6 | 24,6 | 24,0 | 25,1 | 24,9 | 24,5 | 25,1 | 25,1 | |
| Long-term interest rates | % p.a. | 1,1 | 1,9 | 4,3 | 4,4 | 4,0 | 4,1 | 3,7 | 4,0 | 3,7 |
| Crude oil Brent | USD/barrel | 42 | 71 | 101 | 82 | 81 | 72 | 68 | 81 | 73 |
| GDP in the euro area | real growth in % | -6,2 | 6,3 | 3,6 | 0,5 | 0,8 | 0,7 | 1,4 | 0,7 | 1,0 |
Tables and Graphs
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Updated: 10.4.2025
Information
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The Macroeconomic Forecast is prepared by the Economic Policy Department of the Czech Ministry of Finance. It contains forecast for the years 2025 and 2026, and for certain indicators an outlook for the 2 following years (i.e. until 2028). It is published on a quarterly basis (in January, April, August and November).
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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)mfcr.cz
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Cut-off Date for Data Sources: The Macroeconomic Forecast is based on data known as of 1 April 2025.