Macroeconomic Forecast – August 2026

Summary of the Forecast

The global economy is currently facing partial constraints on the supply of production inputs, which is limiting economic activity in a number of countries. Despite heightened geopolitical tensions due to the conflict in the Middle East and disruptions to trade routes in the Strait of Hormuz, no significant secondary inflationary pressures have yet emerged in the global economy. The recovery in investment activity is threatened not only by the uncertainties associated with the war in the Middle East, but also by the tightening of monetary conditions in some economies in response to the deteriorating inflation outlook.

The baseline forecast assumes that the intensity of the military conflict between the United States, Israel and Iran will gradually subside during the second half of this year. However, tensions and isolated incidents will persist, and a comprehensive political solution is not expected to be reached in 2026. Shipping through the Strait of Hormuz is expected to remain significantly restricted and unstable in the third quarter, with a gradual resumption expected from the fourth quarter onwards. Due to high insurance costs, limited availability of insurance cover, damage to infrastructure and persistent security risks, shipping volumes are expected to remain below pre-conflict levels for the remainder of this year. Production and exports of crude oil and liquefied natural gas are expected to recover gradually and could approach pre-conflict levels during the first half of 2027; however, certain constraints linked to damaged infrastructure and disrupted trade routes will persist for longer. Wholesale energy prices are therefore expected to fall gradually, but will remain highly volatile.

The Czech economy continued to grow in the first half of 2026. Real gross domestic product, adjusted for seasonal and calendar effects, rose by 2.2% year-on-year in the first quarter and by 2.0% in the second quarter (flash estimate by the Czech Statistical Office). Quarter-on-quarter growth accelerated from 0.2% in the first quarter to 0.4% in the second quarter, driven mainly by final consumption expenditure and foreign trade, whilst gross capital formation had the opposite effect. Gross value added grew primarily in industry, and most service sectors also performed well.

In 2026, economic growth could reach 1.9%. Growth will be driven exclusively by domestic demand, which will, however, be held back by increased uncertainty and rising energy prices due to the conflict in the Middle East. In addition to continued growth in household consumption, there will be a revival in corporate investment activity. Stronger domestic demand will be reflected in growth in imports. Exports will benefit from a rising volume of industrial orders from abroad; however, growth will be limited by increased trade barriers and disruptions to the supply of production inputs. Economic growth is also expected to be dampened by a reduction in stock levels. In 2027, GDP could rise by 2.4% thanks to continued growth in domestic demand. The balance of trade is expected to continue to make a negative contribution to GDP growth, despite the acceleration in economic growth among the main trading partners, mainly due to higher imports linked to the expected restocking of inventories.

The average inflation rate is expected to reach 2.2% in 2026. The transfer of funding for the renewable energy levy to the state budget, a stronger koruna, falling food prices and a restrictive monetary policy stance will be the main factors counteracting inflation. Higher oil prices resulting from the conflict in the Middle East, as well as the continuing rapid growth in wages and housing costs, will have the opposite effect. In 2027, average inflation is expected to rise to 2.7%, mainly due to higher consumer prices for electricity and gas following the previous rise in their wholesale prices, and the continuing strong growth in wages and imputed rent, whilst the strengthening koruna, monetary policy and the expected fall in oil prices will dampen inflation.

Imbalances linked to labour shortages continue to be evident in the labour market, underpinning the growth in wages and salaries. Real earnings are expected to rise this year and next. Demand for labour is being driven primarily by the services and construction sectors; by contrast, there has been no recovery in industry as yet. The unemployment rate is expected to rise to 3.0% this year and fall to 2.8% next year.

The current account balance is expected to close this year with a deficit of 0.4% of GDP. The year-on-year deterioration in the external position is due, amongst other things, to a reduction in the goods trade surplus, driven by stronger investment activity, higher prices for imported energy commodities and persistent constraints on the export side. The same negative balance, expressed as a percentage, is also forecast for 2027. Higher imports associated with restocking will counteract the positive impact of improved economic performance among our trading partners and the easing of price pressures on energy commodities.

The general government sector is expected to end 2026 with a year-on-year increase in the deficit to 2.7% of GDP, driven not only by higher capital expenditure but, above all, by slower revenue growth. This is due to a shortfall in revenue caused by the expiry of the windfall tax, the waiver of the levy on subsidised energy sources for households and businesses, and, last but not least, the temporary reduction in excise duty on diesel. Against a backdrop of lower year-on-year growth in nominal GDP, public debt is expected to rise by 1.6 percentage points to 45.8% of GDP.

Overall, we consider the risks to the economic growth forecast to be skewed to the downside. The most significant of these remains the development of the conflict in the Middle East and the associated pressure on energy prices, exacerbated by the currently relatively low levels of gas storage. Other significant risks include the security situation in Europe and global trade policy.

Tables and Graphs

Preparation of the Macroeconomic Forecasts

Evaluation of Forecasting History at the Ministry of Finance