Czech Republic: Economy grows at fastest pace since 2008
December 9, 2010
In the third quarter, gross domestic product (GDP) expanded 2.8% over the same period last year, according to revised data published on 9 December. The revised reading was below the 3.0% expansion reported in the initial November estimate. The third quarter increase was up from a 2.3% expansion tallied in the second quarter and marked the fastest growth pace in more than two years. In addition, the third quarter figure overshot the Central Bank's estimate, which had the economy growing 2.7%. A quarter-on-quarter analysis corroborates the strong growth suggested by the annual figures, as GDP increased a seasonally adjusted 1.0% in the third quarter. The acceleration over the second quarter was entirely driven by an improvement in domestic demand, while the net contribution from the external sector deteriorated. Private consumption expanded 1.2% year-on-year, well above the 0.7% increase observed in the second quarter, while government consumption contracted 0.5% (Q2: +1.2% yoy). Fixed investment bounced back in the third quarter and accelerated at the fastest pace since the fourth quarter 2008, growing 1.7% year-on-year (Q2: -3.7% yoy). In addition, an upward shift in inventories boosted domestic demand in the third quarter. Moreover, both exports and imports accelerated over the second quarter, although the expansion in imports was more remarkable. Exports grew 14.1% over the same period last year (Q2: +13.7% yoy), while imports expanded 16.6% annually (Q2: +14.7% yoy). As a result, the net contribution from the external sector to overall growth declined from minus 0.7 percentage points in the second quarter to minus 2.3 percentage points in the third. At the sector level, the expansion in the third quarter was the result of faster growth in both the industrial and the services sectors. Agriculture, on the other hand, contracted sharply over the same period last year. The Central Bank estimates the economy to expand 1.6% this year. In 2011, monetary authorities anticipate the economy to accelerate to 1.8%.
Author: Ricardo Aceves, Senior Economist