- About Bank
- Press Releases
- Macroeconomic Forecast – Custom duties: Muted for now, but brace for impact
Macroeconomic Forecast – Custom duties: Muted for now, but brace for impact
The effect of stocking up combined with the deferral of higher reciprocal tariffs for European exports to the US is likely the reason for this year’s better second quarter and thus also higher growth prospects for the Czech economy this year. The real GDP will grow by 1.9% this year, versus the 1.5% estimated in April. We continue to worry about the adverse impacts of the US tariffs in the second half of this year; these will be felt in FY results mainly in 2026, for which our forecast expects a growth of 1.1% versus the 1.2% in the April forecast. “Compared with the market consensus, we are slightly more pessimistic for 2025 while we already are very much below the market consensus for 2026,” Jan Vejmělek, Komerční banka’s Chief Economist, places Komerční banka’s forecast within the context of the other market players. “Due to the situation in the global economy and in Germany itself we will not be able to rely on external demand this or next year,” Jana Steckerová, Komerční banka’s economist, comments on the prospects for our export markets.
In terms of the structure of the growth, the centre of gravity will shift towards household consumption some more. Thanks to the above effect of stocking up vis-à-vis the threat of higher custom duties on imports into the US, the first half of this year saw not only higher exports but also, naturally, the related higher production. A successful first half means that this year’s industrial production will increase for the first time following two years of decline. “However, the effect of the custom duties will gradually turn from positive into negative, resulting in a moderate recession in the Czech economy in the second half of this year,” notes Martin Gürtler, Komerční banka’s economist. Trade wars also imply continued limitations on investment activity, which will slightly increase only in 2026. Household consumption will be the main driver and also a stabilising anchor of the country’s economy. Despite the slightly rising unemployment, primarily its frictional segment, stabilised inflation will support continued growth of households’ real disposable income.
Inflation will be slightly above the target this year and slightly below the target next year. Consumer prices will grow, on average, by 2.4% and 1.9% in 2025 and 2026 respectively. Core inflation will remain higher (+2.7%) this year, chiefly because of housing services and prices, while the core component should decline to the target level next year due to the persisting monetary restrictions and economic downturn. “On the horizon of the forecast, inflation is basically at the target level and we continue to regard the CNB’s current rates as somewhat restrictive; therefore, the monetary policy rate should drop to the terminal 3.0%, but probably only in 2026,” forecasts Martin Gürtler.
Rate cuts will test the koruna’s strength. “The CNB’s hawkish attitude, which was one of the key factors in the koruna’s recent appreciation to the euro to more than the year’s maximum, will probably persist until the end of this summer because of the lack of disinflation data,” explains Jaromír Gec, Komerční banka’s strategist. However, the negative impacts of custom duties and tight monetary conditions will gradually infiltrate into economic activity and pricing pressures. Additional CNB rate cuts, consistent with the above, during the autumn should result in a narrower interest rate differential, thereby bringing the Czech currency under pressure in the forex markets. “We expect on the whole that the koruna will not continue to strengthen, potentially also erasing some of its recent gains on the euro during the autumn,” Jaromír Gec reveals his outlook.
Further public finance consolidation is nowhere in sight. We expect the national budget’s cash deficit to swell to CZK 280 billion next year due to the government loan for the construction of new units at the Dukovany NPP and increased defence spending in combination with the Czech economy’s slowdown. In spite of that, the Czech Republic is set to continue to meet the Maastricht criteria for public finance deficit and the country’s debt with a comfortable margin. “We consider that the public finance deficit will stay slightly above 2%, as last year, in relation to the GDP this and next year,” Jaromír Gec opines. The adjusted structural deficit relevant for assessing compliance with the country’s fiscal rules is not expected to exceed the legal limit next year. However, we do not expect any further visible public finance consolidation in the years beyond, which also means that the budgetary policy rules might be relaxed. The fiscal policy’s overall effect on the economy should therefore be roughly neutral in the coming years from the perspective of the fiscal impetus.
The development of the lending impetus will continue to be double-tracked. While the mortgage market is likely to experience the second most successful year in terms of volume this year, the demand for corporate loans will remain rather weak. The economic slowdown and the persisting uncertainty will not infuse the necessary stimulus into this demand. The property market continues in its surge. “The property market’s expansion will slow down somewhat, but the price hikes will stay large in general,” predicts Kevin Tran Nguyen, Komerční banka’s economist. In an environment experiencing the building of trade barriers and uncertainty, businesses’ investment decisions will be sidelined. “Monetary restrictions have not yet precipitated any wave of defaults, but they do continue to constrain lending to an extent, although much lesser now,” adds Kevin Tran Nguyen.
Macroeconomic forecast
| 2024 | 2025 | 2026 | |
|---|---|---|---|
| GDP (real growth, yoy in %) | 1,1 | 1,9 | 1,1 |
| Household consumption (real growth, yoy in %) | 2,2 | 2,5 | 1,8 |
| Fixed investment (real growth, yoy in %) | -3,1 | -0,9 | 0,7 |
| External trade balance (CZK bn) | 224,6 | 182,3 | 194,1 |
| Industrial production (real growth, yoy) | -1,0 | 0,8 | 0,5 |
| Retail sales (real growth, yoy in %) | 4,5 | 4,1 | 1,9 |
| Wages (nominal growth, yoy in %) | 7,2 | 6,5 | 4,7 |
| Unemployment rate (MPSV, in %) | 3,8 | 4,5 | 4,8 |
| Inflation (yoy in %) | 2,4 | 2,4 | 1,9 |
| 3M PRIBOR (average) | 5,0 | 3,5 | 3,2 |
| 2W Repo (average) | 5,1 | 3,6 | 3,0 |
| EUR/CZK (average) | 25,1 | 24,9 | 24,8 |
Jan Vejmělek
Komerční banka’s Chief Economist
tel.: +420 222 008 568
jan_vejmelek@kb.cz