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Economic impacts

Expert: Czechia on verge of short-term recession


2023 will bring economic recession to the Czech Republic. Compared to previous periods of economic downturn, this recession will be relatively short and lead to a decline in the gross domestic product of only a few percent. The recession will be accompanied by a rise in the unemployment rate, which, however, will not be dramatic. SYRI National Institute economist Jan Čapek expects inflation to fall to 5% by the end of 2023. Companies that now make high margins will be forced to cut prices because consumer demand has already declined.

“It is expected that the coming recession will be relatively short and shallow,” says Čapek, who specialises in fiscal policy and macroeconomic forecasting. “In percentage terms, I expect the decline in gross domestic product to be in single digits only. By the end of 2023, the Czech economy should be coming out of recession. The labour market will be affected by the crisis, but probably with a delay.”

In the third quarter of 2022 the unemployment rate recorded a 0.5 percentage point decrease, to 2.3%. It will rise gradually during the economic downturn, albeit by no more than 4%, Čapek adds.

The Czech Republic and its citizens’ incomes are affected by high inflation. “Current inflation is caused by different factors, one of which is increased consumer demand caused by spending of savings made at the time of Covid-19 pandemic-related closures,” Čapek explains. “However, the demand factors are now weakening, and other causes of inflation can be expected to weaken in the coming year. Inflation will start to fall significantly to a level of around five per cent.”

Companies that are making high margins and compensate for the drop in profits during the pandemic will have to reduce prices. “Given that the economic recession is gradually starting, some companies will most likely have to curtail their activities or even close down completely,” Čapek says.

The recession is taking its toll on Czech citizens, especially those who live alone. According to the latest studies, the household income poverty index increased from 9-12% in 2021 to 14-17% in 2022.

“A closer look at the results tells us that one of the population groups most affected by income poverty is senior citizens living alone. For this group of people, we observe a marked increase in the proportion of households whose income was below the poverty line as of January 2022. However, in the last two rounds of the survey (late September and early November) we observe a noticeable decline, helped by this year’s pension indexation,” Čapek concludes.


Doc. Jan Čapek Ph.D.

Position: Senior researcher
+420 549 493 283