Czech Republic’s economy is gaining momentum on account of improving domestic demand and strong exports. The EPI grades its current economic performance at solid A level, with the EPI score projected to be close to 95% in 2016.

This is a strong improvement from its C level grade only a few years ago and a B level in 2014. Both exports and domestic demand are performing well, and the recovery in domestic demand is broad-based. Czech Republic’s recovery has been continuing, with GDP growth projected to accelerate to almost 4% in 2015, up from 2% in 2014. Employment continues to grow and unemployment to decline, reaching its lowest rate since the onset of the 2008 crisis and contributing to a welcome recovery in real wages. Following substantial fiscal adjustment during 2011-13, the fiscal stance eased in 2014 but the budget deficit is projected to decline below 2% in 2015. Inflation remains low, driven by low commodity prices and disinflationary environment in Europe.

The 5-Minute Economist projects Czech Republic’s EPI score to start declining gradually in the medium term from almost 97%, or an A level, currently to 94%, or a B+ level, by 2020, mainly driven by growth slowdown and a gradual pick-up in inflation, despite lower budget deficit and unemployment rate.