Economic outlook, analysis and forecasts

Czech Republic - Economic forecast summary (June 2015)

 

The economic expansion has gained momentum, driven by domestic demand. Renewed consumer confidence and income growth are supporting consumer spending, while public spending and an improving outlook are raising investment. Stronger growth in trading partners will drive further growth in exports. Global commodity price falls have temporarily reduced inflation but rising domestic cost pressures will push it towards the target during 2016.


Monetary policy is expected to remain very expansionary to ensure that inflation moves towards the 2% target. The exchange rate should be allowed to float freely again when deflationary risks have largely receded. Fiscal policy is expected to tighten slightly in 2016. Structural reforms to promote competition and reduce skill mismatches in the labour market would raise incomes and make growth more inclusive.


Business investment began recovering in 2014. This upswing is being spurred by accommodative financial conditions, rising confidence and diminishing spare capacity in some sectors. Public investment is currently boosted by efforts to use expiring EU funds. Given the infrastructure gap, effective use of these funds holds the promise of raising productivity and incomes.

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