The Czech Economy in the Second Quarter of 2024: Current Trends and Future Developments
— Press release —
The economic situation in the Czech Republic shows a stable development in 2024. An investment boom is not expected this year. The Ministry of Finance forecasts a real growth of 2.2 percent for gross fixed capital formation, which is only half as much as in 2023. Moderate growth rates of 2.4 percent and 2.6 percent are also expected for 2025 and 2026, respectively.
Strict fiscal policy limits the state's ability to stimulate through public investments. Government spending will contribute only 0.3 percentage points to economic growth in 2024. In contrast, the budget deficit is expected to significantly decrease to 2.4 percent of GDP. This is due to the phasing out of measures to mitigate high energy prices and the implementation of a consolidation package.
Public debt remains low compared to the EU, with the debt-to-GDP ratio rising from 44.0 percent in 2023 to 45.5 percent in 2025. Real GDP growth is expected to rise to about 1.2 percent in 2024, driven mainly by consumption and fixed investments, while inflation declines and real wages recover. Headline inflation slowed from an average of 10.5% in 2023 to 2.4% in 2024 and is expected to drop to 2.2% by 2025, achieving the Czech National Bank's target of 2.0% by early 2025.
A positive factor is the high household savings rate for the past three years, which, along with the projected easing of inflation and rising real wages, will support the growth of private consumption. Nevertheless, recent indicators of consumer and business confidence remain below the historical average, suggesting only a gradual return to higher growth in private demand.
The economic development of the Czech Republic shows a mixed but overall stabilizing trend. While investment activity remains subdued and the state can intervene only to a limited extent, the decline in inflation, the recovery of real wages, and the high economic freedom provide a solid foundation for future growth. Challenges persist, but the long-term outlook points to a gradual recovery and stabilization of the Czech economy.
Remel Executive Search has been active as a recruitment consultant on the Czech market for over 10 years, supporting German clients in filling specialist and leadership positions locally. As a Headhunter with a deep understanding of the local economic landscape and a proven track record, we are well-equipped to help our clients navigate these challenging times and secure the talent needed for long-term success. We remain committed to providing tailored solutions and strategic insights to foster sustainable growth and stability for businesses operating in the Czech Republic.