Economic Overview
For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.
Covid-19 weighed on the fundamentals of the Czech economy that had supported growth: domestic demand, tax, revenues and exports. In 2021, the pace of growth was not sufficient to return fully to the pre-pandemic level, which was only achieved by mid-2022. Over the year, the country’s GDP recorded a moderate growth of 1.9% driven by an uptick in investment activity, with the spillover effects of Russia’s invasion of Ukraine and high energy prices hampering growth. Private consumption is expected to contract in 2023, reflecting a decline in households’ purchasing power. Due to weaker foreign demand and the tightening of financial conditions, the IMF forecasts a GDP growth of 1.5% this year, followed by a better performance in 2024 (+3.9%).
The Czech economy had already shown signs of slowing before the outbreak of Covid-19 amid lower growth in Germany and trade uncertainties, as its industry-based economy, which relies on imports, was strongly affected by supply chain disruptions and high energy prices. In 2022, government revenues increased due to high inflation; however, expenditures were also on the rise owing to the automatic indexation of pensions with inflation and the support packages to mitigate the impact of energy prices (with total net costs estimated at 1% of GDP by the EU Commission), hence the total government budget deficit was estimated at 4.3% of GDP by the IMF. The budget deficit is forecast to decrease to 3.4% of GDP in 2023 and 2.9% in 2024 as revenues will be boosted by a windfall tax on the largest energy companies and banks as well as a levy on revenues above a certain price ceiling for electricity producers. The public debt-to-GDP ratio is still low compared to other EU Member States: it was estimated at 41.5% in 2022 and should remain stable over the forecast horizon. For 2022 as a whole, headline inflation was estimated at 16.3%, reflecting the higher cost of domestic production and imports. The IMF expects the cap on retail gas prices to mitigate inflation in 2023 (8.6%) before it returns to levels closer to the Central Bank’s target in 2024 (2.5%).
Czechia has a tight labour market and a low share of temporary contracts, with one of the lowest ratios of unemployment in Europe, at 2.5% in 2022 (from 2.8% one year earlier). Market conditions may get tighter as Ukrainian refugees join the labour market, but the unemployment rate is expected to remain low this year and the next (2.3% - IMF). The IMF estimated the country’s GDP per capita (PPP) at USD 48,919 in 2022, slightly below the EU average, although nominal wage growth lagged behind inflation last year, reducing real disposable income.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
| GDP (billions USD) | 245.98 | 281.79 | 290.40 | 330.48 | 355.86 |
| GDP (Constant Prices, Annual % Change) | -5.5 | 3.6 | 2.4 | -0.5 | 2.0 |
| GDP per Capita (USD) | 23,001 | 26,331 | 27,613 | 31,368 | 33,745 |
| General Government Balance (in % of GDP) | -5.5 | -5.4 | -3.8 | -3.7 | -2.4 |
| General Government Gross Debt (in % of GDP) | 37.7 | 42.0 | 42.3 | 43.8 | 43.3 |
| Inflation Rate (%) | 3.2 | 3.8 | 15.1 | 11.8 | 5.8 |
| Unemployment Rate (% of the Labour Force) | 2.5 | 2.8 | 2.3 | 3.5 | 2.5 |
| Current Account (billions USD) | 4.90 | -2.36 | -6.28 | 0.95 | 8.58 |
| Current Account (in % of GDP) | 2.0 | -0.8 | -2.2 | 0.3 | 2.4 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
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