The Czech economy is projected to grow by 2% in 2025, driven primarily by household consumption, while inflation is expected to remain at levels similar to this year. Real household incomes are anticipated to rise as nominal wage growth outpaces consumer price increases. Unemployment is expected to inch up but will remain among the lowest in the European Union, according to a survey by the Ministry of Finance and analyses from 13 domestic expert institutions.

Cyrrus Chief Economist Vít Hradil predicts GDP growth will accelerate to 1.9% in 2025, up from approximately 1% this year. “The Czech economy will be driven by domestic factors, particularly household consumption, which is set to rebound after several weaker years,” Hradil said. He also noted that cheaper credit and improved sales prospects should boost corporate investment. However, the economy may face challenges from weak foreign demand, particularly in the industrial sector.

Pavel Peterka, Chief Economist at XTB, expects GDP growth of 2%, attributing it to increased household consumption fueled by a gradual release of savings accumulated during recent years of economic uncertainty. The Ministry of Finance is even more optimistic, forecasting GDP growth of 2.5%, while the Czech National Bank (CNB) predicts 2.4%.

Experts project inflation to hover around this year’s average of 2.5%. Peterka highlighted that food price dynamics, while elevated, should decelerate in the latter half of the year. Meanwhile, growth in service prices is expected to normalize after running at around 5% throughout 2024. Fuel prices are anticipated to exert a deflationary effect.

The CNB has identified service price inflation as a key risk for overall inflation in 2025. However, experts believe the situation will stabilize, keeping inflation under control.

Nominal wages are expected to grow by 5.5% to 6%, leading to real-term wage increases. However, household purchasing power is likely to recover only gradually. Martin Gürtler, an analyst at Komerční banka, estimates that real wages will not return to pre-pandemic levels until mid-2026, with household consumption following a similar trajectory.

Unemployment is forecast to rise slightly to 4% in 2025, primarily due to challenges in the industrial sector, which has been affected by weak demand from Germany. “I don’t expect massive layoffs, as the rest of the economy is well-positioned to absorb potential redundancies,” said Hradil.

Martin Jánský, CEO of Randstad CR, anticipates unemployment to peak in the first quarter of 2025. “Companies are likely to exercise caution in hiring and will focus on maximizing the efficiency of their existing teams,” Jánský noted.

Despite external pressures, the Czech economy is poised for moderate growth in 2025, supported by strong domestic consumption and stable inflation. While challenges in the industrial sector and cautious labor market dynamics may pose hurdles, the overall economic trajectory remains positive, with gradual recovery in household purchasing power and sustained low unemployment.

Source: CTK

The financial situation of Czech households has shown consistent improvement for the third year in a row, according to a December survey by Provident Financial. This year, 32% of respondents described their financial year as successful, up from 25% in 2022. Additionally, the proportion of people who had to reduce spending dropped to 20%, compared to 25% last year.

The survey, which gathered responses from over a thousand participants, revealed that fewer households are limiting spending on daily necessities, entertainment, sports, and vacations. The proportion of those curbing leisure-related expenses fell to 36%, down from 42% in 2023 and 47% in 2022.

Looking ahead, 50% of respondents expect their financial situation to remain the same or improve in 2025, an increase of 10 percentage points compared to last year.

Nearly 12% of participants considered 2024 a financially successful year, with many investing excess funds. This marks an increase of 5 percentage points from 2023 and 7 points from 2022. Furthermore, the survey found that 20% of households were able to build savings this year, while only 21% had to draw on their reserves—a significant improvement from the 30% who reported the same in 2022.

“While the financial outlook is improving, Czechs remain cautious. People are thinking carefully about their expenses, focusing on savings and sensible investments rather than unnecessary borrowing,” said Petr Javůrek, chief analyst at Provident Financial.

Energy bills and summer holidays were the most significant drains on family budgets this year, along with home renovations and household equipment purchases. Energy costs were a particular concern for older adults aged 54–65, with 54% in this group identifying these as a major financial burden. For younger Czechs aged 18–26 and middle-aged individuals between 45–53, summer holidays represented the largest expense.

The survey also highlighted a positive trend: more than a quarter of respondents now regularly set aside money for unexpected expenses. “This demonstrates a responsible approach to personal finance. Households with savings are better prepared for sudden costs, like a broken appliance or unforeseen bills,” Javůrek noted.

Fewer Czechs are concerned about their financial prospects for the coming year. In 2022, 32% of respondents expressed worry about their financial situation, dropping to 25% in 2023 and 21% this year.

“The economic challenges of recent years have taught people to be more mindful of their finances. Even as the economy improves, many households continue to spend cautiously, which has resulted in better overall financial stability,” Javůrek concluded.

As Czechs look to 2025, the trend of prudent financial management and improved household finances offers a promising outlook for continued stability and growth.

Source: Provident Financial and CTK