Real GDP growth in Czechia is expected to pick up to 2.4% in 2025, before slowing to 1.9% in 2026, accelerating again to 2.4% in 2027. Private consumption is expected to be the main driver of growth, due to real wage growth and reduction in households’ saving rates. At the same time, rising tariffs and economic slowdown affecting key trading partners are forecast to weigh on exports in 2025 and 2026. Headline inflation is projected to drop to 2.3% in 2025, due to a slowdown in services inflation and a decline in energy prices, and in spite of a pick-up in food inflation, and is projected to slow further in 2026 and 2027. Despite the phase-out of energy-related measures, the government’s public finance consolidation package of 2024, and the recent pension reforms, public finances are set to stay in deficit at around 2% of GDP.
| Indicators | 2025 | 2026 | 2027 |
|---|---|---|---|
| GDP growth (%, yoy) | 2.4 | 1.9 | 2.4 |
| Inflation (%, yoy) | 2.3 | 2.1 | 2.4 |
| Unemployment (%) | 2.7 | 3.0 | 3.1 |
| General government balance (% of GDP) | -1.8 | -2.0 | -2.2 |
| Gross public debt (% of GDP) | 43.4 | 44.1 | 45.1 |
| Current account balance (% of GDP) | 2.2 | 2.3 | 2.3 |
Economic activity growth driven by internal demand
Czechia’s real GDP growth is forecast to increase to 2.4% in 2025, driven by both domestic and external demand. Growth is set to slow to 1.9% in 2026, due to the negative impact of net exports, then picking up to 2.4% in 2027, supported by continued growth in household consumption and investment. Household consumption is expected to remain the main driver of growth over the forecast horizon. Consumer confidence has improved since April 2024, despite continued economic uncertainty, and household consumption is forecast to expand by over 3% in each forecast year, supported by a continued increase in real wages and a reduction in household saving rates. In 2025, household consumption is expected to rise for the first time above the 2019 levels, following the decline seen in recent years due to the COVID-19 pandemic and high inflation in 2022-23. Household saving rates are expected to moderate but to remain well above the historic average, due to higher consumer uncertainty and structural changes in the distribution of disposable income. Investment is also set to contribute to growth, picking up in 2026 and 2027, following increased absorption of EU funds, recovery in the residential construction sector and higher demand in some industrial segments, both domestically and internationally.
Fiscal expansion and higher defence spending in key trading partners are expected to drive export growth in 2026 and 2027. At the same time, higher US tariffs are expected to weigh on exports, mostly indirectly, via the exposure of its automotive components’ producers to other EU countries. As domestic demand expands, imports are projected to grow faster than exports, resulting in a negative contribution of net exports to economic growth in 2026. Significant downside risks remain due to uncertainties in international trade as well as over the scope of Czechia’s export growth linked to the fiscal expansion of its trading partners.
The labour market remains tight
The unemployment rate is expected to remain among the lowest in the EU, gradually picking up from 2.7% in 2025 to 2.9% in 2027. Ongoing structural changes are reflected in employment, resulting in increased female participation and employment in services, together with a decline of employment in manufacturing. Growth in nominal wages is expected to remain above inflation for the whole forecast horizon but to decline from 5.9% in 2025 to 5.4% in 2026 and 4.8% in 2027.
Inflation continues its downward path
HICP headline inflation is forecast at 2.3% in 2025 and is expected to slow down further to 2.1% in 2026, before a rebound to 2.4% in 2027. Services inflation remains the main contributor, driven by strong wage growth, which is expected to decelerate over the forecast horizon. Food prices picked up significantly in the first two quarters of 2025, offsetting the declines other components. Energy is set to contribute negatively to inflation in 2025 and 2026, as wholesale energy prices have declined and are expected to ease further. However, the introduction of ETS2, if not delayed, is expected to push up energy inflation in 2027. Headline inflation excluding energy and food is forecast above headline inflation at 3.0 in 2025 and 2.7% in 2026, to then drop 0.2 pps. below it, to 2.2% in 2027.
General government balance to remain in deficit
The budget deficit is set to drop to 1.8% in 2025 from 2.0% in 2024, driven by nominal GDP growth and decreasing expenditure in the context of the recent pension reforms and revenue increase due to a government consolidation package in 2024.
The budget deficit is forecast to increase to 2.0% of GDP in 2026, under a no-policy-change assumption, turning the fiscal stance from contractionary to neutral. 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 continue decreasing as a percentage of GDP, albeit at a slower pace. While the growth of social benefits is set to remain subdued due to reduced indexation of pensions, government employee salaries are expected to rise in line with nominal wage increases.
The deficit is expected to rise to 2.2% in 2027. The revenue-to-GDP ratio is set to decline on the back of decreasing capital transfers, outpacing the decline in expenditure driven by spending on social benefits growing slower than GDP. Overall, this implies a contractionary fiscal stance for 2027.
Public investment is expected to remain strong in 2025 and 2026, partly driven by increased defence expenditure, before dropping in 2027. Public debt is set to remain below the EU average. The public debt-to-GDP ratio is forecast to rise from 43.3% in 2024, to 45.1% in 2027, driven by the negative headline balance, partly offset by nominal GDP growth.