Czech Republic: GDP contracts again in the second quarter
GDP declined by 0.4% year on year in the second quarter—a similar contraction to Q1. On a seasonally adjusted quarter-on-quarter basis, economic activity expanded by 0.1% in Q2, following the previous quarter’s flat reading. Q2’s reading marked the best result since Q2 2022.
Private consumption slid at a more moderate rate of 4.5% year on year in Q2 from a 5.4% contraction in Q1. Government spending growth ebbed to 3.3% in Q2 (Q1: +3.4% yoy). Meanwhile, fixed investment bounced back, growing 2.5% in Q2, contrasting the 0.8% decrease logged in the prior quarter.
Exports of goods and services growth fell to 4.5% in Q2, marking the worst reading since Q2 2022 (Q1: +6.4% yoy). In addition, imports of goods and services growth slowed to 0.8% in Q2 (Q1: +3.0% yoy).
Activity will be subdued this year, as domestic demand will be buffeted by tight financing conditions, still-elevated inflation and depleted savings. Moreover, an EU-wide economic slowdown will weigh on exports. The disbursement of EU funds should sustain activity, however. Energy price swings and further spillover effects from the Ukraine war pose risks to the outlook.