Czech Republic: Pace of economic contraction softens in Q1
The economy shrank 2.1% on a seasonally-adjusted year-on-year basis in Q1 2021, amid another wave of Covid-19 infections which prompted the government to tighten restrictions. The contraction was softer than expected by market analysts and followed the sharper 4.8% drop recorded in Q4 2020. Meanwhile, output decreased 0.3% in seasonally-adjusted quarter-on-quarter terms in Q1, swinging from Q4’s 0.6% expansion.
Although a detailed breakdown is yet to be released, a continued decline in household spending drove the annual contraction in Q1, while both government spending and the external sector made positive contributions to growth. On the supply side, the trade, transportation, accommodation and food services sectors bore the brunt of tighter containment measures.
Commenting on the release, Jakub Seidler, Czech Republic chief economist at ING, stated:
“Despite economic restrictions due to the pandemic, the performance of the domestic economy has exceeded the expectations of recent quarters. For the whole year, we expect GDP growth to be around 3%, mainly due to the economic recovery in the second half of the year and the low base effect. Still, uncertainty remains high due to the pandemic situation.”
Meanwhile, commenting on the short-term outlook, Tomas Dvorak, economist at Oxford Economics, added:
“The vaccine rollout was slow in Q1 with only 18% of the population vaccinated so far. The vaccination programme will pick up speed now that the supply constraints have been overcome, but there is still some way to go and we do not expect any meaningful relaxation of restrictions before June.”
More detailed national accounts data for Q1 will be released on 1 June.