Czech Republic: Economy contracts for 7th consecutive period
December 4, 2013
In the third quarter, GDP contracted a seasonally and calendar-adjusted 1.3% over the same quarter last year (preliminary estimate: -1.6% year-on-year), according to revised data. The reading represents a slight improvement compared to the 1.5% contraction recorded in the second quarter; this is, however, the seventh consecutive period of decline in economic activity.
The milder decrease in the third quarter reflected an improvement in domestic demand. Growth in total consumption was flat in Q3 (Q2: -0.3% year-on-year), reflecting a solid 2.6% increase in government spending (Q2: +1.5% yoy), which compensated for the 0.1% decrease in private consumption (Q2: -0.3% yoy). Gross fixed investment contracted 5.6% in Q3, improving somewhat from a 6.1% plunge recorded in Q2.
On the external front, exports of goods and services swung from a 0.5% increase in Q2 to a 0.2% contraction in Q3. Imports increased 1.8%, which contrasted the 0.9% contraction observed in Q2. Consequently, the external sector's net contribution to overall economic growth deteriorated notably, reaching minus 1.6 percentage points in Q3, which was down from plus 1.1 percentage points in Q2.
A quarter-on-quarter comparison paints a more negative picture for the Czech economy. GDP fell a seasonally-adjusted 0.1% in Q3 (Q2: +0.5% qoq), which represents the seventh contraction in the last eight periods - the longest recession since records began in 1996.
The Czech National Bank expects economic activity to decline 1.5% this year and to rebound in 2014, expanding 2.1%. FocusEconomics Consensus Forecast panelists are more optimistic and expect the economy to decline 0.7% this year, which is unchanged over the previous month's projection. For 2014, the panel sees the economy increasing 1.8%, which is up 0.1 percentage points over the previous month's estimate.
Author: Ricardo Aceves, Senior Economist