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Czechia GDP growth is expected to contract by 0.3% in 2023, before picking up to 1.6% and 2.1% in 2024 and 2025, respectively. Elevated inflation and tight monetary policy are weighing on domestic demand. Slower global growth and trade will moderate exports and activity, notably in manufacturing. Private consumption will pick up in 2024, underpinned by growing real wages. Inflation will continue to decline and get close to 3% – the upper boundary of the tolerance band – in early 2024. The labour market will remain tight with an unemployment rate below 3%. Volatility in energy supply and geopolitical tensions remain major risks. Shocks to commodity prices could make inflation more persistent. Macroeconomic policy needs to maintain a tight stance until inflation is firmly under control, while monitoring risks to financial stability. Fiscal consolidation should also be pursued to rebuild fiscal buffers. An overdue reform of the pension system would help contain steep future rises in public expenditures. Higher labour participation, notably of mothers, would help address chronic labour shortages and support growth. Reducing emissions and reliance on coal would make growth more sustainable. The economy has been stagnating GDP stagnated in the first half of 2023 and declined in the third quarter. Tighter monetary policy and slower global growth are weighing on activity and trade, especially the manufacturing sector. Declining real incomes and low sentiment have hit household consumption. In contrast, public investment is accelerating due to the ending of the EU 2014-2020 programming period as well as the use of funds from the Next Generation EU. Consumer price inflation has declined rapidly since early 2023, to 8.5% in October. The labour market remains tight, with a low unemployment rate of 2.5% in the third quarter of 2023.
Czechia
Source: Czech Statistical Office; and S&P Global. StatLink 2 https://stat.link/bgnvkt
OECD ECONOMIC OUTLOOK, VOLUME 2023 ISSUE 2: PRELIMINARY VERSION © OECD 2023