CZECHIA: Czech Banking Association Lowers 2025 Growth Estimate To +1.7% Y/Y
May-22 08:24
The Czech Banking Association (CBA) revised its GDP growth forecasts for 2025 and 2026 lower to +1.7% and +2.0%, respectively, in its latest round of quarterly macroeconomic forecasts, from +2.1% and +2.4% in February. It said that 'the negative impact of trade wars and the uncertainty associated with them have significantly contributed to the weaker outlook.'
- The CBA expects trade wars to trim 0.8pp off Czechia's GDP growth over 2025 and 2026, assuming a steadying of US tariffs on European imports of 12% on average. On the other hand, 'the Czech economy's starting position is somewhat stronger than we expected in February or than the first quarter GDP numbers suggest.'
- Despite a weaker growth outlook, the CBA sees limited scope for a further decline in interest rates, due to persistently strong wage and inflation dynamics. They expect a 25bp cut bringing the repo rate to 3.25% in August and another 25bp cut in early 2026, with balanced risks to this forecast.
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