Czech Republic GDP Q1 2017

Czech Republic

Czech Republic: Economy speeds up in Q1 on stronger exports and private consumption

May 18, 2017

GDP in the Czech Republic grew 1.3% over the previous quarter in Q1 in seasonally and working-day adjusted terms, according to an advance estimate released by the National Statistics Office (CSO) on 16 May. The result benefited from strong external demand and rising household spending. Moreover, it came in well above the 0.4% growth observed in Q4 2016 and surprised markets on the upside. In annual terms, GDP grew 2.9% in Q1, which represented a significant acceleration compared to the 1.9% rise observed in Q4.

Economic activity was buoyant in the first quarter, with household spending supported by strong labor market conditions, rising wages, low inflation and upbeat consumer sentiment. Moreover, the high PMI readings throughout the quarter showed that the economy had been underpinned by solid external demand, especially from the German market, which has prompted Czech businesses to expand production and hire more workers. In terms of economic sectors, according to the National Statistics Office the expansion was broad-based, covering both the manufacturing and service sectors.

The positive economic panorama is set to continue despite the recent political turmoil, with the economy likely to pick up this year, supported by solid household spending, stronger external demand and a partial recovery of EU investment funds.

More detailed data will be released on 2 June.

The Czech National Bank expects the economy to expand 2.9% in 2017 and 2.8% in 2018. FocusEconomics Consensus Forecast panelists expect the economy to expand 2.6% in 2017, which is unchanged from the previous month’s projection. For 2018, the panel sees GDP increasing 2.6%.

Author: Massimo Bassetti, Senior Economist

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