Real GDP growth in Czechia picked up to 2.6% in 2025 but is forecast to slow down to 1.8% in 2026, before accelerating again to 2.4% in 2027. Growth is expected to be driven by private consumption, in light of rising real wages and a reduction in households’ saving rates. At the same time, the energy price shock and growing uncertainty are forecast to weigh on economic activity, especially in 2026. Despite a moderation in services inflation, headline inflation is projected to pick-up in 2026, due to a spike in energy prices, and to then broadly stabilise in 2027. The public deficit is set to increase, reaching 2.9% in 2027, reflecting the government’s fiscal expansion.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 2.6 | 1.8 | 2.4 |
| Inflation (%, yoy) | 2.3 | 2.7 | 2.8 |
| Unemployment (%) | 2.8 | 3.1 | 3.2 |
| General government balance (% of GDP) | -2.1 | -2.8 | -2.9 |
| Gross public debt (% of GDP) | 44.3 | 45.8 | 47.2 |
| Current account balance (% of GDP) | 1.7 | 0.4 | 0.8 |
Strong growth, driven by private demand
Czechia’s real GDP grew by 2.6% in 2025, driven by both domestic and external demand. Growth is expected to slow down to 1.8% in 2026, under the impact of the energy price shock and a negative contribution from net exports. However, growth is projected to pick up to 2.4% in 2027, supported by solid household and government consumption, investment, and improvements in the contribution from net exports. Household consumption was the main driver of growth over in the second half of 2025 and this trend is set to continue over the forecast horizon. Consumer confidence has improved markedly since April 2025, but was impacted by increased uncertainty and higher energy prices in April 2026. Despite these recent developments, household consumption is forecast to expand by close to 3% in both 2026 and 2027, supported by further growth in real wages and a gradual decline in households’ saving rates. In 2025, household consumption surpassed 2019 levels for the first time, following a protracted decline during the COVID-19 pandemic and the energy crisis in 2021/22. Household saving rates are projected to gradually moderate, but will remain well above the historic average, due to elevated consumer uncertainty as well as to structurally larger asymmetries in the distribution of disposable income. Investment is expected to contribute positively to growth, expanding at a brisk pace in 2026 and 2027 following an increased absorption of EU funds, recovery in residential construction and higher demand, both domestic and foreign-based, in some industrial segments.
Exports are expected to grow in 2026 and 2027, driven by fiscal expansion and higher defence spending in some key trading partners. At the same time, US tariffs, higher energy costs and economic uncertainty are expected to weigh on export growth, especially in 2026. The strong expansion in domestic demand is expected to lead to rapid imports growth, resulting in a negative contribution of net exports to economic growth in 2026, before turning slightly positive in 2027. Significant downside risks remain due to uncertainties in international trade and over the scope of Czechia’s export growth linked to the fiscal expansion of its trading partners.
Tight labour market despite an uptick in unemployment
The unemployment rate is projected to pick up gradually, from 2.8% in 2025 to 3.2% in 2027, though it will remain among the lowest in the EU. The recent structural changes affecting the Czech economy are reflected in employment, with higher female participation and employment in services, matched by a decline in manufacturing employment. Nominal wage growth is projected to remain markedly above inflation but is expected to gradually decline, from the 6.5% recorded in 2025 to 5.5% in 2026 and 4.9% in 2027.
Inflation affected by energy price shocks
HICP headline inflation is projected to accelerate, from 2.3% in 2025 to 2.7% in 2026, and 2.8% in 2027. The energy price shock is pushing inflation higher, directly impacting energy inflation and subsequently passing through to the other HICP components. In 2026, price increases in transport fuels and gas are expected to outweigh the decline in electricity prices due to the government taking over the payment of the renewable energy fee from consumers. Energy inflation is expected to accelerate in 2027, due to a delayed pass-through to consumer prices. Services inflation is projected to moderate in 2026, reflecting the slowing wage growth, following the same trend in 2027. Core inflation excluding energy and food is forecast above headline inflation in 2026, at 3.0%, 0.1 pps above 2025, before edging down to 2.5% in 2027.
Fiscal expansion set to increase deficit
Czechia’s general government deficit increased marginally to 2.1% of GDP in 2025, on the back of higher employee pay and increased government subsidies for renewable energy sources, partially offset by higher GDP growth. Public investment increased in 2025 as percentage of GDP, supported also by the completion of projects financed by the EU.
The budget deficit is forecast to increase to 2.8% of GDP in 2026, turning the fiscal stance from neutral to expansionary. The revenue-to-GDP ratio is projected to decrease, reflecting the full phase-out of the tax on energy companies’ windfall profits. Expenditure is set to stay broadly unchanged as a percentage of GDP, with the growth of social benefits stabilising due to reduced pension indexation, while government employee salaries are expected to rise in line with nominal wage increases. The untargeted temporary reduction in excises on diesel taken in response to the outbreak of the war in the Middle East amounts to less than 0.1% of GDP in 2026.
Under a no-policy-change assumption, the deficit is expected to rise to 2.9% in 2027. The revenue-to-GDP ratio is set to decline on the back of decreasing capital transfers from the EU, broadly offset by a decline in spending on social benefits and public investment. Overall, this implies a contractionary fiscal stance for 2027.
Public debt remains low compared to the EU average. The public debt-to-GDP ratio is forecast to rise from 44.3% in 2025 to 47.2% in 2027, driven by the negative primary balance, partly offset by nominal GDP growth.