The Czech Banking Association (ČBA) has raised its forecast for Czech economic growth in 2025 to 2.1 %, signalling that the economy remains resilient despite global trade disputes and modestly rising inflation.
The ČBA now expects growth of 2.1 % this year and 2 % next year, a more optimistic outlook than the 1.7 % growth predicted in May. The revision comes despite US tariffs, which are expected to remain in place through 2026. While trade wars continue to weigh on the economy – projected to reduce Czech GDP by 0.6 percentage points in 2025 and 2026 – the impact is less severe than the -0.8 % forecast earlier in the year.
The improved forecast rests on two key factors:
Stronger export activity: Buoyed by international demand, which offsets the negative effects of tariffs in the latter half of the year. Additional exports to the US, however, are expected to contribute less, as advance purchases were already made in previous quarters.
Solid economic fundamentals: Including a slight upward revision of GDP for the second quarter and marginally higher real wage growth. This is despite a slightly higher consumer price inflation forecast of 2.5 % for this year, expected to return closer to the central bank’s target of 2.2 % in 2026.
The ČBA anticipates a cautious cut to the Czech National Bank’s key interest rate, bringing it down to 3.25 % in the first quarter of 2026, supported by a stronger koruna, lower ECB rates, and US Federal Reserve policy.
On the fiscal front, the ČBA expects a stable budget deficit slightly above two per cent of GDP, necessitating further savings. However, a more expansionary fiscal programme after the October elections, combined with higher inflationary pressure from stronger growth, could weigh on the interest rate outlook.
Overall, the Czech economy demonstrates solid and resilient growth dynamics. Its post-Covid recovery in Central and Eastern Europe continues, now accompanied by lower inflation, moderate interest rates, and a smaller budget deficit. The forecast also points to a moderate slowdown in credit growth, reflecting the underlying structure of economic expansion.
