Czech Republic GDP Q4 2020

Czech Republic

Czech Republic: Economic contraction stabilizes in Q4

February 2, 2021

The economy shrank 5.0% on a seasonally-adjusted year-on-year basis in Q4 2020, matching the drop recorded in Q3 but beating market expectations of a 7.7% contraction. Meanwhile, output increased 0.3% in seasonally-adjusted quarter-on-quarter terms in Q4, down from Q3’s 6.9% jump (s.a. qoq) but beating market expectations of a 2.5% fall. Taking the year as a whole, the economy shrank 5.6%, strongly contrasting 2019’s 2.2% expansion and marking the worst contraction since current records began in 1996.

Although a detailed breakdown is yet to be released, a pronounced slump in household spending drove the annual contraction, while external demand increased notably. On the supply side, the trade, transportation, and accommodation and food service sectors were hit especially hard.

Commenting on the release, Jakub Seidler, chief Czech Republic economist at ING, stated:

“This year, we expect the domestic economy to grow by around 3.5%, especially given our assumption that a rapid economic recovery will start from the end of the second quarter. Although today's better-than-expected figures suggest 2021 GDP growth will be even higher, some risk factors have intensified in recent weeks due to the slow vaccination rollout and new coronavirus mutations. For this reason, we are leaving the growth estimate around 3.5% for the time being.”

More detailed national accounts data will be released on 2 March.

FocusEconomics Consensus Forecast panelists see GDP expanding 4.5% in 2021, which is unchanged from the previous month’s projection, before growing 3.9% in 2022.

Author: Massimo Bassetti, Senior Economist

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