Tariff troubles: OECD slashes Czechia growth forecast amid global trade war

The Organization for Economic Co-operation and Development (OECD) has downgraded its growth forecast for Czechia, reflecting mounting global trade tensions, domestic economic uncertainties, and weakening national and international investment. The OECD now expects Czech GDP to grow by just 1.9 percent in 2025. And next year doesn’t promise much stronger growth.

The OECD has worsened its outlook for Czechia owing to a combination of external and domestic factors that are expected to weigh on growth. 

Internationally, rising trade barriers—particularly tensions between major economies like the U.S. and China—have disrupted global supply chains, creating uncertainty for export-dependent countries such as Czechia. 

Domestically, investment is projected to slow as businesses delay or scale back spending in response to these global risks. The OECD also cited tighter financial conditions, weaker business confidence, and persistent geopolitical instability, including the ongoing war in Ukraine, as contributing to a more cautious economic outlook.

For households in Czechia and the country’s workers, the downgraded forecast could translate into more modest wage growth, fewer job opportunities in export-reliant industries, and tighter household budgets. 

While private consumption, supported by rising real incomes, remains a key driver of growth, the broader economic environment is becoming more uncertain.

Although inflation is expected to decline to the Czech National Bank’s 2 percent target this year, past price surges have left many households financially stretched. Combined with slower income growth, this may limit consumer spending power and reduce savings.

Industries such as automotive manufacturing—a major pillar of Czech exports—are particularly exposed to global supply chain disruptions and ongoing tariff disputes. If trade tensions escalate, businesses may delay hiring or scale back investment, potentially impacting employment and regional economies.

Small business owners may also face growing uncertainty, with the OECD warning of potential volatility in input costs and demand. Over the longer term, the organization emphasized the need for reforms to improve public spending efficiency and prepare for structural pressures like population aging, higher defense budgets, and the ecological transition.

The report comes as the EU continues negotiations with the U.S. over new tariffs, which could affect Czech exports. The OECD stressed that constructive dialogue on trade is essential to avoid further disruption.