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Czech Republic GDP Q3 2017

Czech Republic: Economy accelerates in the final quarter of 2017

A detailed breakdown of GDP, released by the Statistical Institute on 2 March, showed that the economy grew strongly in the fourth quarter, picking up pace slightly from the third quarter. In the fourth quarter, the economy grew 5.2% year-on-year, a notch above the previous quarter’s revised 5.1% growth rate (previously reported: +5.0% year-on-year). The result was driven mainly by buoyant domestic demand. In quarter-on-quarter terms, the Czech economy slowed marginally from a revised 0.6% expansion in Q3 (previously reported: +0.5%) to a 0.5% increase in Q4.

In annual terms, growth in the domestic economy was driven by both private and government consumption, as well as fixed investment. Private consumption growth came in at 4.3% year-on-year, matching the prior quarter’s growth rate-the quickest pace of expansion since the first quarter of 2007. Strong labor market dynamics likely drove private consumption, offsetting slightly higher average inflation. Government consumption expanded 1.1%, a slightly more moderate pace of growth than the previous quarter’s 1.3%; it moderated for the third consecutive quarter. Fixed investment, however, grew at a slightly quicker pace in the fourth quarter than in the third quarter (Q4: +7.9% yoy; Q3: 7.8% yoy), chiefly driven by increased investment in construction and machinery equipment.

The external sector’s contribution to growth swung, however, from a 0.72 percentage-point contribution in the third quarter to a 0.04 percentage-point subtraction in the final quarter. Net exports decreased for the third consecutive quarter. Import growth outpaced export growth as they expanded 8.3% and 7.6%, respectively (Q3: +7.0% yoy and +7.4% yoy, respectively). Export growth was driven by foreign demand for transport equipment, while import growth was aided by strong demand for machinery equipment and electronics.

The fourth-quarter result brought full-year growth to 4.5%, significantly above the prior year’s 2.5% expansion. This year, growth is expected to be buttressed by solid private consumption amid strong labor market dynamics. Robust foreign demand should keep export growth afloat and contribute to economic growth. However, relations with the EU could become strained further going forward, following Eurosceptic Andrej Babis’ election victory on 20–21 October 2017, which could drag on growth. Prime Minister Babis has not yet been able to form a majority government.

Czech Republic GDP Forecast

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