The Czech Republic’s economy is on a wide upturn, marking one of the leading signs of economic success in recent years. Analysts are predicting this recovery to continue over the next two years with growth accelerating possibly as soon as 2027. This expected increase is almost entirely due to a recovery in – though still by all accounts somewhat depressed – foreign demand, reflecting continuing headwinds from global economic conditions.
When the economy stabilizes, the koruna could be expected to appreciate again, but only slowly. This strengthening will take place at a much slower rate than is projected so far for this year. The future of the koruna will depend largely on global economic trends. The Czech National Bank will be operating under the influence of these uncertainties.
The Czech labor market is still the envy of many countries, as it has proven remarkably resilient to all these changes. That means the labor market should expect to cool modestly over the next two years. This drop is primarily due to high restrictive rate setting and a declining German automotive industry, the latter of which plays an outsized role in Czechia’s economy.
Inflation rates pose another area of concern. Analysts are beginning to expect inflation to remain slightly above target for the remainder of this year. Further, they project it will stay at that level for the next two years too. This persistent inflation is the result of generative economic conditions at home and external shocks, especially from Germany’s macroeconomic woes.
That includes Germany, Czechia’s most important trading partner, which is suffering from poor macroeconomic fundamentals. These challenges pose enormous barriers for export and cross-border trade, and private sector investments. Global economic uncertainty combined with the impact of U.S. imposition of tariffs makes for a complicated and often contradictory picture. They are very important for trade and investment prospects. A likewise high tide of prudent foreign commerce could be expected for the next twelve months.
Looking forward, the most prevailing CCP peek ahead medium-term rate stability for CNB’s primary base rate. Taken together, these conditions suggest that rates will be expected to remain flat. As the economic picture shifts, analysts are now anticipating the first rate cut to come around mid-2027.