Czech Republic: Economic growth moderates in third quarter
December 9, 2011
In the third quarter, GDP grew 1.2% over the same quarter last year, according to a revised and more complete data set of national accounts released by the National Statistics Office. The quarterly figure was revised down from the 1.5% flash estimate released on 15 November and represented a slowdown compared to the 2.0% expansion observed in the second quarter. In addition, the third quarter expansion represents the slowest pace since March 2010, when the economy came out of recession. The quarterly slowdown was entirely driven by worsening domestic demand. Total consumption contracted 1.2% annually in Q3, dragged down by declines in private consumption (-0.4% year-on-year) and government consumption (-3.0% yoy). Moreover, gross fixed investment swung from a 3.1% expansion in Q2 to a 1.9% contraction in Q3 and a downward shift in inventories shaved 1.3 percentage points off overall economic growth. On the other hand, the external sector showed better developments. Exports of goods and services increased 8.8% in the third quarter (Q2: +13.2% yoy), while imports expanded 3.1% in Q3 (Q2: +11.3% yoy). As a result, the external sector's net contribution to overall economic growth improved from 2.2 percentage points in the second quarter to 4.7 percentage points in the third. At the sector level, the third quarter deceleration reflected a contraction in agriculture and weaker growth in the industrial and services sectors. A quarter-on-quarter comparison points to an even sharper deceleration than suggested by the annual figures, as GDP contracted a seasonally adjusted 0.1% in the third quarter, which contrasted the 0.2% increase tallied in the second quarter. The Central Bank sees the economy growing 2.0% in 2011, which is virtually unchanged from its previous 2.1% estimate. However, for 2012, the Bank cut its growth projections and now expects the economy to expand 1.2%, down from its previous 2.2% estimate. Monetary authorities stated that the austerity measures adopted by the government and the ongoing slowdown in the Eurozone (the country's main exports destination) will dent economic growth in the coming year.
Author: Ricardo Aceves, Senior Economist