Key highlights at a glance

• GDP growth: The economy expanded by 2.6% in 2025, driven mainly by household consumption and government spending, with improved fixed investment linked to housing and construction.
• Inflation: In early 2026 inflation stayed below the Czech National Bank’s 2% target tolerance band; inflation in Q1 2026 was 1.6%.
• Labour market: Unemployment remained among the lowest in Europe at 2.78% in 2025, while employment continued to rise, especially in services.
• Public finances: The state budget recorded a CZK 290.7 bn deficit in 2025; the 2026 budget plans revenues of about CZK 1.9 tn and expenditures of CZK 2.6 tn, with a planned deficit of CZK 310 bn.
• External position: The goods trade balance posted a CZK 19.3 bn surplus in January 2026, while the current account ended 2025 in a CZK 62.6 bn surplus.

Growth: domestic demand strengthens, exports remain resilient

Growth in 2025 was anchored by rising household consumption and public-sector demand, while investment improved—particularly in housing and construction. Czechia’s external trade balance remained positive, and exporters increasingly diversified towards destinations outside the EU.

For 2026–2027, the baseline expectation is that Czech economic activity will expand at around 3% per year, supported by household consumption (helped by rising real wages) and an overall supportive policy mix in 2026. Export performance is expected to remain robust, with potential upside if stronger demand from key partners supports regional growth.

A structural theme in the medium term is a gradual decline in the relative weight of traditional industry, alongside increased adoption of digital technologies and artificial intelligence across sectors, which may raise productivity and competitiveness.

Inflation and monetary conditions: price pressures eased, but risks persist

Inflation moderated markedly compared with 2025 and in early 2026 remained below the central bank’s 2% target band. A stronger koruna contributed to easing prices of some imported items, while core inflation stayed below 3% due to service-sector price growth linked to wage pressures.

Producer prices continued to fall early in 2026, especially in industry and agriculture, although price increases persisted in construction work and market services for businesses.

An important upside risk is renewed energy-price inflation: tensions affecting energy supply routes may raise oil prices, with potential spillovers to gas and electricity prices and, over time, broader cost‑push inflation.

Labour market: unemployment remains very low, services drive job gains

Czechia’s labour market remained strong, with unemployment at 2.78% in 2025 and continued demand for labour—particularly in services. Total employment increased and hours worked rose, while employment declined in the primary and secondary sectors and expanded in the tertiary (services) sector.

The outlook expects unemployment to stay low by historical and international standards, with short-term stabilisation followed by a gradual decline later in 2026 under the baseline scenario.

Public finances: deficit remains sizeable, spending priorities shift

Public finances remain manageable but face pressure from investment needs and security-related priorities. The 2025 state budget deficit reached CZK 290.7 bn and general government debt stood at 43.1% of GDP in Q3 2025.

Fiscal policy in 2026 is described as expansionary, driven by higher public-sector wages, faster absorption of EU funds, increased defence spending and preparatory work for new nuclear capacity, alongside support for renewables. In the baseline view, the stance is expected to become slightly restrictive in 2027.

External sector and investment: trade surplus and FDI interpretation

Czechia’s external accounts remained in surplus, supported by export performance and an improving current‑account balance. In January 2026, the goods trade surplus reached CZK 19.3 bn, while exchange-rate appreciation over the previous year influenced import and export dynamics.

Foreign direct investment (FDI) stock data point to rising inward and outward positions over 2025–2027. The material also notes a long‑term trend of a gradually improving (less negative) balance of investment income from FDI, and highlights that Czechia has been a net foreign investor for more than a decade.

Note for readers comparing investor ‘origins’: statistics may classify investors by the ‘immediate’ investor (the first foreign entity in the ownership chain) or by the ‘ultimate’ investor (the final controlling owner). These approaches can lead to different country rankings, especially when holding structures are used.

International context: Europe’s challenges and global risks

Across Europe, the 2026 outlook is shaped by uncertainty around global trade policy and elevated geopolitical risk, with energy prices identified as a key channel affecting inflation and financial conditions. The EU single market continues to play a stabilising role during global disruptions, even as Europe faces structural constraints on long‑term productivity growth.

Globally, growth is described as solid but exposed to risks from trade barriers, conflict-related shocks and supply‑chain disruptions—particularly where energy flows are affected.

Outlook for 2026–2027: baseline scenario and key risks

Under unchanged conditions, Czechia is expected to experience stable growth, low inflation and gradual fiscal improvement over 2026–2027. The key strategic challenge remains strengthening investment, productivity and innovation—seen as central to long‑term competitiveness and resilience.

Risks include renewed energy-price shocks, broader supply disruptions and continued uncertainty in global trade relations, which could affect inflation and growth across Europe, including Czechia. 

 

Připravil: Ing. Roman Plevák, Ph.D., vedoucí sekce obchodu a ekonomické spolupráce na Velvyslanectví ČR v Addis Abebě