Skyline of Prague, Czech Republic

Czech Republic GDP Q3 2019

Czech Republic: Growth ebbs in Q3

The economy grew a seasonally-adjusted 2.5% year-on-year in the third quarter, matching the preliminary estimate and moderating from Q2’s 2.7% expansion, according to a detailed breakdown of GDP released by Czech Republic’s Statistical Institute on 29 November. In quarter-on-quarter seasonally-adjusted terms, growth also eased to 0.4% in Q3 from 0.6% in Q2.

Softening domestic demand drove the overall deceleration. Notably, fixed investment dipped 0.3% in annual terms amid lower machinery and equipment investment, marking the first decline in two years and a half (Q2: +1.4% year-on-year). Private consumption remained the engine of growth but slowed sharply, up 2.3% year-on-year and marking the softest expansion in five years (Q2: +2.9% yoy). Similarly, public spending ebbed, but remained solid nonetheless (Q3: +3.3% yoy; Q2: 3.5% yoy).

On the external front, although net trade contributed positively to growth, it was mainly due to a slowdown in imports. Exports of goods and services rose 1.8% on an annual basis (Q2: +2.5% yoy) amid weaker demand from key trading partners in the EU. Meanwhile imports increased only 1.0% year-on-year (Q2: +1.9% yoy), reflecting waning import-intensive investment at home. Taken together, the external sector contributed 0.7 percentage points to growth, matching Q2’s contribution.

Looking ahead, the economy is seen losing pace next year largely on less buoyant domestic demand. Although private consumption is expected to soften, it should remain sturdy nonetheless amid the tight job market. Strong public investment, propped up by EU funds, should also cushion the overall moderation. Global trade uncertainties and weak industrial sentiment weigh on the outlook.

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