Investment will be bolstered by easing financial conditions and the stronger use of EU funds. The growth of exports will pick up, as demand from Czechia’s main trading partners strengthens. Headline inflation is projected to remain around the 2 % target, with core inflation gradually easing.

Risks are tilted to the downside, related to geopolitical tensions and a more persistent slowdown of growth in key trading partners, especially Germany. Trade wars may hamper the investment appetite of the export-oriented industry next year. This is especially so in those sectors that already face high uncertainty due to rising global competition or higher energy prices.

Monetary policy should remain restrictive until underlying inflation pressures subside. Fiscal consolidation should continue in the medium term to rebuild fiscal buffers and prepare for long-term spending pressures. Reforming the vocational education and training (VET) system and expanding opportunities for reskilling and upskilling are needed to reduce skill shortages and mismatches, and boost productivity.

Source: OECD
Prepared by the CzechTrade London team