The Czech Ministry of Finance has lowered its economic growth forecast for 2025. If the state budget proves insufficient this year, the government plans to use its reserves, which total about 100 billion Czech koruna.
The gross domestic product (GDP) is expected to grow by 2.3%, which is higher than last year’s 1.1% growth, but still lower than the ministry’s autumn estimate of 2.5% and even less than the August forecast that was used to create this year’s state budget. The August forecast predicted a 2.7% growth.
According to Finance Minister Zbyněk Stanjura (ODS), this revision should not negatively impact tax revenue, as the economy is largely constrained by exports, which do not have a direct major impact on the budget. More important factors are wages and household spending, which are expected to rise.
Stanjura also noted that the budget should be supported by corporate profits, which have been taxed at a higher corporate tax rate since last year. However, due to delays in payments, this change will fully take effect in the treasury only this year.
At the same time, the forecast highlights several risks to the domestic economy — and indirectly to the state budget: the rise in commodity prices, renewed issues in foreign trade due to the geopolitical situation, a further decline in Germany, or U.S. tariffs. If Donald Trump indeed imposes tariffs on the EU, Czechia could be indirectly affected, mainly due to its subcontracting for the production of components used in goods manufactured in Germany and other Western European countries. The Ministry of Finance has conducted a special analysis of the potential impact of U.S. tariffs, and according to this analysis, the domestic economy could face a slowdown in growth by another one or two-tenths of a percentage point. As a result, the overall growth is expected to improve by just around 2%.
Additionally, there are several discrepancies in the budget compared to the previous year when it was prepared. The main issue is uncovered expenses for the support of solar power plants, which operators are legally entitled to. New sections will be introduced to the Senate this week, aiming to complicate access to these subsidies.
