CNB Raises Czech Deficit Forecast to 2.7% as Fiscal Pressures Persist

The Czech National Bank has revised its estimate for the country’s general government deficit in 2026 to 2.7 percent of GDP, up from its previous forecast of 2.5 percent released earlier this year, reflecting a slower pace of fiscal consolidation.

According to the central bank’s latest macroeconomic outlook, the deficit is expected to widen further to 3.1 percent of GDP in 2027. The revision comes amid continued pressure on public finances, despite gradual improvements since the pandemic period.

The CNB estimates that the fiscal shortfall narrowed to roughly the mid-2 percent range of GDP in 2024, with a slight increase in 2025. However, structural imbalances remain a concern. The structural deficit, which adjusts for economic cycle effects, is projected to rise from around 2.1 percent of GDP last year to approximately 2.6 percent in 2026.

Public debt is also expected to continue its upward trajectory. The central bank forecasts that government debt will increase to 45.7 percent of GDP in 2026, up from 44.3 percent a year earlier, before reaching 47.2 percent in 2027. While still below the European Union average, the trend reflects sustained fiscal pressures in the medium term.

On the macroeconomic side, wage growth is expected to remain relatively strong, although moderating compared to previous years. Nominal wages are projected to increase by 6.4 percent in 2026, following growth of over 7 percent in 2025, with real wage growth supported by easing inflation.

Labour market conditions are forecast to soften slightly. The unemployment rate is expected to rise to 4.8 percent in 2026 before edging down marginally in 2027, indicating a gradual cooling from historically tight conditions.

The CNB also anticipates a deceleration in residential property price growth. After a strong rebound in 2025, price increases are projected to slow to 8.3 percent in 2026 and further to 5.6 percent the following year, suggesting a more balanced market environment.

Overall, the central bank’s latest projections point to a period of moderate economic adjustment, with fiscal consolidation progressing more slowly while key macroeconomic indicators gradually stabilise.