Economic outlook, analysis and forecasts

Czech Republic - Economic forecast summary (November 2015)


Economic growth picked up strongly in 2015, driven by private demand and a boost from EU-financed public investment. Supportive financial conditions, growth in wages and profits and strengthening external demand are projected to support robust growth in 2016 and 2017. Rising domestic costs will push inflation to the 2% target level in 2017.

Monetary policy remains appropriately expansionary to ensure that inflation returns to the target. But as soon as inflation is clearly increasing towards the target, the unconventional exchange rate policy – preventing appreciation against the euro – should be ended. Fiscal policy will become slightly restrictive, consistent with medium-term budgetary objectives. Reforms to expand labour supply, reduce skills mismatches and increase competition would boost economic convergence and help to make growth more inclusive.

The challenge for climate change policy is to reduce the high energy and carbon intensity of growth by shifting away from coal and improving energy efficiency. Subsidies and grants for investment in renewable energy and improving energy efficiency have been expanded. The effective tax rate on CO2 emissions is low relative to other OECD countries and could be increased.



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