The Czech economy grew by 0.4 percent year-on-year in the 1st quarter, the CZSO estimated

Commercial presentation Update: 04/30/2024 10:29 AM
Issued by: 30/04/2024, 09:12

Prague – The Czech economy grew by 0.4 percent year-on-year in the first quarter of this year. Compared to the last quarter of last year, the gross domestic product (GDP) increased by 0.5 percent. This follows from a preliminary estimate published by the Czech Statistical Office (ČSÚ) on its website today. According to statistics, the quarter-on-quarter GDP growth was positively influenced by growing domestic demand, while demand from abroad had a negative impact. According to analysts, the Czech economy has begun to revive more strongly, driven by household consumption. In the second quarter, it could surpass the pre-pandemic level.

“Total expenditure on final consumption and a growing foreign trade balance contributed to the year-on-year growth. On the contrary, gross capital formation continued to decline,” pointed out Vladimír Kermiet, director of the National Accounts Department of the CZSO.

The increase in domestic demand, which supported the quarter-on-quarter growth of the economy, was mainly due to higher household spending and gross capital formation. “The quarter-on-quarter development of gross added value was mainly positively influenced by the group of trade, transport, accommodation and hospitality sectors. The decline occurred in industry, the construction industry stagnated,” said the CZSO.

Employment increased by 0.4 percent year-on-year in the first quarter. Compared to the previous quarter, employment increased by 0.2 percent.

Analysts: The economy has started to revive, it will soon surpass the pre-pandemic level

The Czech economy began to recover more significantly in the first quarter, its growth being mainly driven by household consumption. Analysts contacted by ČTK agree on this when evaluating today’s data on the development of gross domestic product (GDP). According to analysts, the Czech economy could surpass the pre-pandemic level in the second quarter, and they estimate GDP growth of around 1.5 percent for the whole year.

“The long-awaited economic recovery is apparently becoming a reality. Czech households were evidently waiting for the hot phase of the inflationary crisis to pass, they renewed their shattered confidence in a bright tomorrow and began to spend more,” Cyrrus Chief Economist Vít Hradil told ČTK. According to him, if there is no further shock that would affect Czech consumers, there is a good chance that the economy will continue to rise in the coming quarters.

UniCredit Bank Chief Economist Pavel Sobíšek pointed out that the quarter-on-quarter growth was the strongest in the last eight quarters. “Therefore, the Czech economy last achieved a better result before the inflationary wave and during the opening of economies after the covid fast. The result means that the Czech economy has finally embarked on the path of a more tangible recovery. Its performance came close to the pre-covid state at only 0.2 percent, so there is a good chance that it will be overcome already in the second quarter of this year,” he said.

According to Deloitte Chief Economist David Marek, the GDP development shows that the Czech Republic is experiencing an economic spring. “In the previous three years, the Czech Republic went through three strong negative shocks: the pandemic, the disruption of supply chains and the energy crisis. The beginning of this year is noticeably calmer, and after the inflation subsides, the economy is breathing again into growth. However, the difficulties of our business partner, the German economy, cannot be overlooked is struggling and without its growth, the possibilities of the Czech economy are limited,” he pointed out.

Creditas Bank chief economist Petr Dufek also warned that weak growth in Germany will be a drag on the Czech economy this year. According to him, this is already being reflected in the performance of the domestic industry. This year, economic growth will be mainly driven by household consumption. “Consumption will probably not return to the pre-covid level this year, because given the previous drop, it will take maybe two to three years,” he pointed out, however.

Overall, analysts assess the development of GDP in the first quarter positively, confirming the return to economic growth after last year’s decline of 0.2 percent. “For the whole of this year, the Czech economy is probably headed for a growth of over one percent, while, if the European industrial sector wises up in the meantime, a value close to 1.5 percent seems achievable,” concluded Hradil.

CR GDP economy 1st quarter AUDIO GRAPHICS CZSO OPENER