IMF Executive Board Concludes 2026 Article IV Consultation with the Czech Republic
IMF News, March 27, 2026
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- Published: March 27, 2026
Macroeconomic performance and near-term outlook
- Real GDP growth in 2025: 2.6 percent, driven primarily by domestic demand.
- Domestic demand growth in 2025: 3.2 percent.
- Growth drivers in 2025: recovering real wages supporting consumption; public investment strengthened by strong EU funds absorption.
- Weaker components in 2025: private investment and exports softened amid global policy uncertainty and rising trade barriers.
- Headline inflation in February 2026: 1.4 percent, reflecting lower energy and food prices and the transfer of the renewable energy surcharge to the state budget.
- Core inflation (most recent): 2.7 percent, driven by persistent services price pressures, including housing-related costs, and nominal wage growth of around 7 percent.
- Staff preliminary projection for 2026: real GDP growth of 2.2 percent, with the output gap closing.
- Rationale: consumption supported by recovering real wages and a modest decline in the saving rate; investment should strengthen as interest rates fall; exports expected to recover more gradually.
- Medium-term projection: growth easing toward 1.8 percent potential, constrained by demographics and modest productivity gains.
- Headline inflation projection for 2026: average 2.4 percent, as higher energy prices outweigh the transfer of the renewable energy surcharge and earlier koruna appreciation; core inflation expected to remain sticky.
Risks and shock assessment
- Major shock considered: energy shock from the war in the Middle East—staff lowered growth forecasts and raised inflation projections accordingly.
- Risk directions in the near term:
- Upside risk to inflation and downside risk to growth from rising geopolitical risks and further intensification of military conflicts.
- A more expansionary fiscal stance could temporarily lift growth above potential and add to price pressures, requiring tighter monetary policy.
- Global uncertainty or financial market corrections could damp activity and heighten inflation volatility.
Executive Board assessment and policy guidance
- Overall view: continued robust activity and economic resilience amid structural challenges; outlook subject to considerable uncertainty; medium-term risks tilted to the downside.
- Fiscal policy guidance:
- Importance of preserving fiscal space amid rising medium-term spending pressures.
- Recommendation for gradual and sustained fiscal adjustment to contain debt and financing needs.
- Important measures: restraining wage bill growth, better-targeting social spending, and strengthening expenditure efficiency.
- Caution: any changes to the recent pension reform should be carefully assessed.
- Encouragement: authorities’ efforts to strengthen tax compliance and rebalancing the tax system away from labor toward property taxation.
- Monetary policy guidance:
- Current stance judged broadly appropriate given persistently elevated core inflation and a narrowing output gap.
- Recommendation: a data-driven approach to monetary policy; tighter monetary policy and clear communication would be necessary if fiscal developments exacerbate macroeconomic imbalances.
- Support for the central bank’s review of its monetary-policy analytical and modeling framework; emphasis on maintaining strong analytical frameworks.
- Views on reserves and balance sheet: benefits of central bank balance sheet normalization generally noted; many Directors recommended caution in reducing FX reserves given elevated global uncertainty.
- Financial stability and macroprudential guidance:
- Financial stability risks remain contained, supported by a resilient banking system.
- Need for continued vigilance given rapid property price growth and increased interconnectedness.
- Scope for targeted macroprudential measures should risks intensify.
- Support for ongoing efforts to strengthen the AML/CFT framework, particularly in higher-risk sectors.
- Structural reform priorities:
- Advancing structural reforms to raise potential growth and ease fiscal consolidation burden.
- Priorities: reducing administrative burdens, accelerating digitalization, improving the business environment, strengthening labor market participation, modernizing vocational training and public education.
- Additional priorities: strengthening energy security, managing rising aging-related costs, and expanding affordable housing to support inclusive, long-term growth.
Selected economic indicators (2025–2027)
- NATIONAL ACCOUNTS
- Real GDP (expenditure): 2025 = 2.6; 2026 = 2.2
- Domestic demand: 2025 = 3.2; 2026 = 2.5; 2027 = 2.0
- Output gap (percent of potential output): 2025 = -0.5; 2026 = 0.0; 2027 = 0.2
- LABOR MARKET
- Employment: 2025 = 0.5; 2026 = 0.3; 2027 = 0.1
- Unemployment rate (average, in percent): 2025 = 2.9; 2026 = 3.0
- PRICES
- Consumer prices (average): 2025 = 2.4
- Consumer prices (end-of-period): 2025 = 2.7
- MACRO-FINANCIAL
- Broad money (M3): 2025 = 5.6; 2026 = 4.5
- Private sector credit: 2025 = 4.0; 2026 = 3.5
- Nominal effective exchange rate (index, 2005=100): 2025 = 112.1
- Real effective exchange rate (index, CPI-based; 2005=100): 2025 = 123.6
- PUBLIC FINANCE (percent of GDP)
- General government revenue: 2025 = 41.4; 2026 = 41.1; 2027 = 40.6
- General government expenditure: 2025 = 43.5; 2026 = 43.3; 2027 = 43.1
- Net lending / Overall balance: 2025 = -2.0; 2026 = -2.3; 2027 = -2.5
- Primary balance: 2025 = -1.4; 2026 = -1.6; 2027 = -1.8
- Cyclically adjusted balance (percent of potential GDP): 2025 = -2.6
- General government debt: 2025 = 44.6; 2026 = 46.4; 2027 = 47.6
- BALANCE OF PAYMENTS (percent of GDP)
- Trade balance (goods and services): 2025 = 5.8; 2026 = 3.3
- Current account balance: 2025 = 0.7; 2026 = -1.5; 2027 = -1.3
- Gross international reserves (billions of euros): 2025 = 150.9; 2026 = 160.3; 2027 = 167.2
- Gross international reserves (in months of imports of goods and services): 2025 = 8.7; 2026 = 8.5; 2027 = 8.6
- Gross international reserves (in percent of short-term debt, remaining maturity): 2025 = 124.9; 2026 = 115.9; 2027 = 107.6
Executive Board concluding statement, IMF press release dated March 27, 2026.