The Czech Ministry of Finance forecasts a 2.3% GDP growth for 2025, but potential U.S. tariffs could pose a significant risk. Household consumption and investment are expected to drive the economy, while unemployment remains low.
The Czech Ministry of Finance forecasts a 2.3% GDP growth for this year, an improvement from last year's 1.1%. The Ministry warns that potential U.S. tariffs on European goods could negatively impact the Czech economy, reducing growth by about 0.5 percentage points. Although the U.S. is not a primary export market for the Czech Republic, the country could still feel the effects due to its economic ties with Germany.
Another risk to economic growth is the weaker-than-expected performance of the German economy, which could reduce Czech growth by 0.1 percentage points. The German government recently lowered its growth forecast to 0.3%. Despite these risks, household consumption in the Czech Republic is expected to drive economic growth, with a projected increase of 3.4%, supported by rising real wages and decreasing savings rates. Investment activity is also expected to revive, with an estimated growth of 2.8%, thanks to lower interest rates.
The labor market is anticipated to remain tight, with unemployment expected to decrease slightly to 2.5%. While some sectors may experience layoffs, overall unemployment is projected to stay low. The Ministry of Finance is the first institution to release its winter economic forecast, with the Czech National Bank set to present its outlook next week.
Source: Ceskenoviny.cz
Author: CzechTrade and CzechInvest Ofiice in New York