MACROECONOMIC FORECAST OF THE CZECH REPUBLIC 1Q 26
February 2026: Growth outlook steady at 2.6% with low price growth
Prague, 11 February 2026 - The forecast panel of the Czech Banking Association (CBA), which brings together the chief economists of leading Czech banks, confirms a stable and balanced growth trajectory for the Czech economy. Real GDP growth should remain at a solid 2.6% in both 2026 and 2027, after accelerating from 1.1% in 2024 to 2.5% in 2025. Compared to the November forecast, this is mainly an upward revision for 2026, while the outlook for 2027 remains unchanged. It also confirms that the performance of the economy in 2025 was slightly more favourable than expected at the end of last year.
The outlook thus brings a further improvement in the performance of the Czech economy, by a cumulative 0.5 percentage point, following its autumn improvements of 0.4 and 0.2 percentage points for 2025 and 2026, respectively. However, these improvements do not only reflect the greater resilience of the Czech economy, supported by higher wage growth, government investment, and the de-escalation of customs disputes, but also the expected looser fiscal policy. The recovery in investment activity will also be positive this year, probably also thanks to the return of stronger corporate lending activity observed in recent months.
Economic growth remains relatively balanced across expenditure components. Household consumption continues to be the main driver, with growth between 2.6% and 2.9% over 2025-2027, slightly below the 3% threshold. However, this outlook represents a rather positive risk, as household disposable income is expected to grow faster in 2026 than in 2025, mainly due to stronger real wage growth and changes in government policy.
Inflation should slow to 1.7% on average in 2026, after 2.5% in 2025, and accelerate again slightly to 2.3% in 2027. However, core inflation remains elevated and represents a key upside risk to inflation, especially in services prices. In this environment, the consensus forecast continues to assume that the CNB's key interest rate will remain stable at 3.50% over the forecast horizon, although half of the panel can envisage a 25bp decline in the rate over the next two years. Fiscal policy remains looser due to the expected increase in the government deficit to an average of -2.7% of GDP this year and next, leading to a gradual increase in government debt to 45.7% of GDP in 2027.
CBA poll: Potential growth of the Czech economy?
Panelists estimate it at around 2.4% y/y on average, with half of the panelists in the 2.2%-2.5% range. At the same time, they expect it to accelerate slightly to 2.5% in 2027, which is slightly 0.1 pp higher than the estimate for 2027 from last summer.
CBA Macroeconomic Forecast in figures:
|
Indicator |
2024 |
2025 |
2026 |
2027 |
|
vs. previous outlook |
||
|
|
|
|
|
|
2025 |
2026 |
2027 |
|
|
Real GDP growth (%, yoy) |
1,1 |
2,5 |
2,6 |
2,6 |
|
(0,1) |
(0,4) |
(0) |
|
Household
consumption (%) |
2,2 |
2,9 |
2,8 |
2,6 |
|
(0) |
(0,1) |
(0) |
|
Government
consumption (%) |
3,1 |
2,1 |
2,2 |
2,2 |
|
(-0,1) |
(0,2) |
(0,2) |
|
Investment
(excluding inventories, %) |
-3,0 |
0,9 |
3,2 |
3,1 |
|
(0,7) |
(0,3) |
(0,1) |
|
Export
(%) |
1,1 |
4,1 |
3,6 |
4,3 |
|
(0,5) |
(0,5) |
(0,2) |
|
Import
(%) |
0,2 |
5,0 |
3,7 |
4,4 |
|
(0,2) |
(-0,1) |
(0,3) |
|
Inflation: CPI (%) average |
2,4 |
2,5 |
1,7 |
2,3 |
|
(0) |
(-0,5) |
(0) |
|
Inflation: CPI (%) end of year |
2,9 |
2,1 |
2,0 |
2,3 |
|
(-0,6) |
(-0,1) |
(0) |
|
Core Inflation CPI (%) average |
2,5 |
2,7 |
2,5 |
2,3 |
|
(0) |
(0) |
(0) |
|
Share of jobless persons (MLSA):
average (%) |
3,8 |
4,4 |
4,6 |
4,5 |
|
(0) |
(0) |
(0) |
|
Average wage in nominal terms (growth
in %) |
7,2 |
7,0 |
5,8 |
5,2 |
|
(-0,2) |
(0,2) |
(0,1) |
|
Average real wage (%) |
4,7 |
4,4 |
4,0 |
2,9 |
|
(-0,2) |
(0,7) |
(0,1) |
|
Government deficit / surplus (% of
GDP) |
-2,0 |
-2,1 |
-2,9 |
-2,6 |
|
(0) |
(-0,3) |
(-0,2) |
|
Government debt (% of GDP) |
43,3 |
43,8 |
44,9 |
45,7 |
|
(0,1) |
(0,4) |
(0,7) |
|
CNB main rate 2week repo (%): end of
period |
7,00 |
3,50 |
3,50 |
3,50 |
|
(0) |
(0) |
(0) |
|
3M-PRIBOR (%): average |
5,0 |
3,6 |
3,5 |
3,6 |
|
(0) |
(0) |
(0) |
|
10Y Czech goverment bond yield:
average (%) |
4,0 |
4,3 |
4,4 |
4,3 |
|
(0) |
(0,02) |
(0) |
|
ECB refinancing rate (%): end of
period |
4,50 |
2,15 |
2,15 |
2,15 |
|
(0) |
(0) |
(0) |
|
EUR/CZK: average |
25,1 |
24,7 |
24,2 |
24,1 |
|
(0) |
(-0,1) |
(0) |
|
EUR/CZK: end of year |
25,2 |
24,2 |
24,1 |
23,9 |
|
(-0,2) |
(-0,1) |
(-0,1) |
|
Real GDP growth in the euro area (%) |
0,8 |
1,4 |
1,2 |
1,5 |
|
(0,1) |
(0,2) |
(0,1) |
|
Oil price (USD/barrel): BRENT average
|
80 |
69 |
64 |
65 |
|
(0,3) |
(-0,1) |
(0) |
|
Growth of bank loans to clients (%) |
6,1 |
5,8 |
6,4 |
5,9 |
|
(0) |
(0,4) |
(-0,2) |
|
Growth of bank loans to households
(%) |
4,9 |
7,2 |
7,2 |
6,6 |
|
(0,4) |
(0,2) |
(0,2) |
|
Growth of bank credits to
(non-financial) corporations (%) |
7,6 |
4,0 |
5,2 |
5,4 |
|
(-0,5) |
(0,4) |
(0) |
|
Growth of bank clients' deposits,
total (%) |
7,4 |
4,4 |
4,9 |
5,0 |
|
(0) |
(0) |
(0) |
Source: CBA forecast, CSO, CNB, Labour Office, Macrobond
Key factors for better CBA forecasts
1) Stronger export and investment activity - the outlook for foreign demand has increased slightly, although it will only strengthen in the second half of this year. Together with stronger industrial and export activity towards the end of the year, our outlook reflects slightly stronger growth in Czech exports, which is also being helped by efforts to diversify markets (greater focus outside the euro area, a return to the UK market, growth in Asia outside China and in the US). The potential risk remains the weak impact of the fiscal package on the German economic recovery.
2) Fiscal impulse - the forecast looks for an average government deficit of around 2.7% of GDP this year and next, cumulatively 1.2% of GDP higher than in 2024 or 2025. This is reflected in a stronger outlook, both for government and, to some extent, household consumption.
3) The outlook for strong household consumption, albeit relatively conservative - supported by higher real wage growth and a still high savings rate.
Balanced and stable growth of the Czech economy
In terms of the expenditure components of GDP, household consumption remains the main driver of growth. It is likely to grow by 2.9% in 2025, 2.8% in 2026 and 2.6% in 2027. Its momentum is slightly declining over time due to slower real wage growth and a slightly higher unemployment rate, but it still represents a slight upside risk. This is due to continued strong real wage growth and diverging fiscal policy settings. The latter is likely to be more supportive of households' disposable income, for example through a shift of the renewable energy payment to the budget, a renewed reduction in the self-employment levy or a return to a more generous pension indexation scheme. The impact of the aforementioned transfer of the OPEB from households' bills on their disposable income is uncertain due to the different timing of the billing.
Jaromír Šindel, Chief Economist, Czech Banking Association:
"In terms of the expenditure components of GDP growth, household consumption remains the key driver. Although we continue to expect its growth to be below 3% in all years of the forecast, it nevertheless represents a slight upside risk. This is mainly related to the expected stronger growth in household disposable income, which is expected to exceed the 2025 pace in 2026."
If the hypothesis of stronger growth in disposable income, which grew more slowly than average wages in 2025 (also due to the negative effects of lower interest rates and fiscal consolidation - its impact only slowed in the second half of 2025), comes true, then we could see stronger growth in household consumption. This would otherwise imply a further rise in the household savings rate, which remained at an abnormally high level of 18.4% in Q3 2025. Conversely, the impact of ending low-interest mortgage fixings may dampen spending by some households - although the effect of refinancing from higher rates should neutralise this factor over the next two years. Household consumption may also be supported in our forecast by the risk of a further reallocation of public investment spending, for example from the defence sector or a slowdown/delay in the construction of new energy capacity, towards consumption.
Government consumption grows at a steady pace of around 2.2% in our outlook (0.2 pp stronger than in the previous forecast), while investment activity gradually recovers after a sharp decline in 2024 (-3.0%). Their improved growth of 0.9% yoy in 2025 reflects stronger government investment. The further acceleration in investment activity this year and next above 3% yoy (with a cumulative improvement in the outlook of 0.4 pp) reflects continued strong government investment but also lower interest rates. It also reflects the pro-cyclical investment behaviour associated with stronger economic growth. In the private sector, investment trends associated with higher defence spending in Europe as well as energy investment will also continue to be a factor. The January decline in industrial capacity utilisation and persistent uncertainty on the external demand side for industrial products remain risks. At the same time, new lending to non-financial corporations cannot rule out the hypothesis that some of the funds are being used to bolster liquidity rather than to implement new investment projects.
The quarter-on-quarter dynamics of the economy should remain relatively stable. We do not expect significant fluctuations in the quarter-on-quarter GDP growth rate, which should be around 0.6%-0.7% in both 2026 and 2027. This reflects a combination of the different timing of the impact of higher real wages on consumption, the timing of fiscal policy easing and the recovery in investment activity.
Jan Vejmělek, Chief Economist of Komerční banka:
"The year 2025 has shown the resilience of the Czech economy. In light of geopolitical uncertainties and the reshaping of international trade relations in connection with the introduction of tariffs on imports to the US, the economy grew at its fastest pace in three years. Household consumption returned to pre-pandemic levels, as did real wages, and investment continued to grow well above that level."
Short-term labour market deterioration, or a return to a less inflationary environment
The labour market remains relatively tight, although the unemployment rate has been rising gradually and has surprised negatively in recent quarters compared to our forecast. The average share of unemployed persons is expected to rise from 3.8% in 2024 and 4.4% in 2025 onwards to 4.6% in 2026, with a slight decline to 4.5% in 2027. We therefore expect unemployment to stabilise over a horizon of one to two quarters, consistent with a solid outlook for industrial activity. In our view, this seemingly mixed labour market picture primarily reflects a culmination of structural changes in the labour market and a convergence towards a neutral unemployment rate from historically very low levels, rather than a cyclical cooling of the economy.
The flexicurity amendment to the labour code, which came into force in June 2025 and is increasing the willingness of workers to change jobs, may play a role in this development. Higher and longer unemployment benefits, including an increased benefit cap, may increase registered unemployment in the short term. In the medium term, however, it can support higher wage growth, better labour allocation and productivity growth, and thus potential economic growth.
The outlook for real wages was revised significantly upwards in the February forecast. Average nominal wages are likely to grow at 7.0% yoy in 2025 and we expect a more modest slowdown to 5.8% this year and 5.2% in 2027. However, due to the marked slowdown in inflation, this implies stronger real wage growth, which we expect to be 4.0% in 2026 and 2.9% in 2027. Real income growth is thus one of the main channels supporting household consumption.
Although we expect the unemployment rate to stabilise at a higher level compared to the previous 3.4% in 2022 and 2.8% in 2019, we believe that the labour market will still be more of an inflationary factor, albeit a milder one than in previous years, where fiscal policy will also play a role, with a likely more brisk pace of average wage growth in the future. This impact needs to be corrected by gradual structural changes.
Pavel Sobíšek, Chief Economist, UniCredit Bank:
"We see the deterioration in fiscal discipline as the main risk that will prevent the CNB from cutting interest rates. A possible strengthening of the koruna is a risk in the opposite direction."
Consumer inflation will hover around the inflation target
Average consumer inflation is expected to slow from 2.5% in 2025 to 1.7% in 2026, before accelerating again to 2.3% in 2027. The slowdown in inflation in 2026 thus represents a significant easing of price pressures compared to the previous year. However, core inflation remains relatively elevated, averaging around 2.5% in 2026, thanks to the persistently strong annualized momentum at the end of last year and early this year, close to 3%. The main upside risk to inflation remains services prices, whose momentum has accelerated rather more in recent months and is not fully consistent with a return of inflationary pressures to the target, and the property market does not favour an early reversal towards significantly more moderate price increases. The overall inflation path thus reflects a combination of wage developments, fiscal policy and persistent labour market tightness on the one hand, versus disinflationary regulatory intervention by the government on the other.
The possible abolition of concession fees is not included in the current consensus forecast. This move could reduce consumer price inflation next year by around 0.3 percentage point, i.e. on a par with the inflation target. However, this effect would probably be partly offset by a fiscal stimulus of around CZK 10 billion (slightly over 0.1% of GDP), which would again have a partly inflationary effect on core inflation. On the other hand, beyond the forecast horizon, the risk of a delayed possible introduction of ETS2 can be perceived.
The outlook for milder inflation is also due to monetary policy and the koruna exchange rate
In this inflationary environment, the consensus of the February forecast continues to assume that the CNB base rate will remain stable at 3.50% over the entire forecast horizon. However, half of respondents allow for the possibility of a 25bp cut in the CNB rate during 2026 or 2027. But the baseline scenario of an unchanged CNB rate reflects a combination of subdued headline inflation, but with persistent core pressures and fiscal policy uncertainties limiting the scope for monetary easing. The average 3M PRIBOR rate is expected to be around 3.5%-3.6%. The 10-year government bond yield also remains relatively stable at around 4.3-4.4%.
Interest rates in real terms remain relatively tight due to the slowdown in overall consumer price growth, which is also true for the real exchange rate of the koruna. The nominal value of the koruna should remain relatively strong. Our forecast is for an average CZK/EUR exchange rate of around 24.2 in 2026 and around 24.1 in 2027, which contributes to easing imported inflationary pressures in the tradable segment. The solid outlook for the koruna reflects a persistently supportive interest rate differential and again a more constructive outlook for export activity.
Bank loans and deposits
Overall, customer loans are expected to accelerate slightly to 6.4% y-o-y this year, with a structure in line with the growth of the Czech economy. Here, we are referring to continued growth in loans to households of 7.2% yoy, similar to 2025, while we also expect growth in loans to non-financial corporations to accelerate to over 5% yoy after 4% in 2025. The overall momentum reflects not only the consistently strong volumes of newly contracted housing loans, but also a strong rebound in new lending to the corporate sector, where the dominance of foreign currency loans has also eased. 2027 should, even given the continued recovery in investment activity, maintain strong growth in lending to corporates close to 5.5%, and also bring a slight slowdown in growth in lending to households to 6.6%.
Deposit growth should accelerate to 5% this year and next, after slowing to 4.4% in 2025 (reflected in a slight increase in the deposit-to-lending ratio to 63% this September). The slower growth in deposits to loans reflects the more moderate growth in corporate lending compared to 2024, but also the decline in interest rates, the relative recovery in household portfolio investment rather than savings, as well as the projected lower household savings rate.
Solid and resilient growth trajectory of the Czech economy partly dampens international regional differences
As part of the post-Covidian recovery, the Czech economy continues to outperform Germany, which is expected to outperform it by nearly 8% over the forecast horizon (2027). At the same time, Czech GDP is expected to outperform the euro area's post-Covidian trajectory in late 2026-2027. In the region, the Czech economy is expected to move closer to Slovakia, stabilise the gap with Hungary, but lose slightly to Poland again. These differences reflect diverging household consumption dynamics. If these upside risks materialise, the Czech economy could further improve its regional position.
In terms of meeting the inflation target, consumer price growth will average around the mid-point of the target for the Czech economy, and will be slightly above it in Poland, which has allowed the central bank there to ease monetary policy, but this is not the case for Hungarian consumer prices, with their slight overshoot of half a percentage point, and for Slovak consumer price growth, which averages more than one percentage point above the central bank's target. While we do not expect the 3% fiscal limit to be exceeded in the case of the Czech government finances, Poland will exceed it by more than 3% of GDP over the next two years, Slovakia and Hungary by around 1.4% and 2% respectively.
Czech economic outlook in charts
