Czech Republic: GDP collapses at unprecedented clip in Q2 on Covid-19 hit
July 31, 2020
The economy contracted at an unprecedented rate in the second quarter as the full brunt of Covid-19 related restrictions was felt. According to a preliminary estimate, output collapsed 10.7% in year-on-year, seasonally adjusted terms in Q2 (Q1: -2.0% yoy), slightly better than what analysts had anticipated. Similarly, on a quarter-on-quarter basis, GDP plunged a record-breaking 8.4% in Q2 (Q1: -3.4% qoq).
Although a detailed breakdown is yet to be released, a significant decline in foreign demand as well as lower household and capital spending drove the historic downturn. On the supply side, nearly all sectors of the economy shrunk, with the vital industrial sector and the segment of trade, transportation, and hospitality services being especially hard hit.
Commenting on the outlook for the remainder of the year, Jakub Seidler, chief economist at ING Czech Republic, noted:
“For the whole of 2020, we still expect a roughly 7% decline in the Czech economy, but it will very much depend on the pace of recovery of the global economy in the second half of the year, which will, in turn, depend on the epidemiological situation and this is difficult to estimate. […] For the domestic economy, the worst is probably behind us in terms of GDP, as 2Q should mark the bottom.”
More detailed national accounts data will be released on 1 September
Author: Javier Colato, Economist