Economic growth records fastest upturn since Q4 2021 in Q1

GDP growth upwardly revised: GDP growth sped up to 0.8% on a seasonally and calendar-adjusted quarter-on-quarter basis in the first quarter (Q4 2024: +0.7% qoq s.a.), marking the sixth consecutive expansion and the fastest since Q4 2021. The outcome outpaced an initial estimate of 0.5% sequential economic growth in Q1. On an seasonally and calendar-adjusted annual basis GDP growth accelerated to 2.2% in Q1 from 1.8% in the previous quarter, the best result since Q2 2022.

Fixed investment and exports lead the charge: The sequential acceleration was driven domestically by a firm rebound in fixed investment, which bounced back to 1.1% (Q4 2024: -2.4% qoq s.a.) on the back of lower interest rates. Less positively, private consumption growth ground to near a halt, rising just 0.1% in Q1 (Q4 2024: +1.5% qoq s.a.) due to renewed consumer pessimism. Moreover, public spending fell 1.5% (Q4 2024: +0.7% qoq s.a.)—the sharpest drop in three years—on fiscal consolidation efforts. On the external front, exports of goods and services rebounded, growing 2.8% in Q1 (Q4 2024: -1.6% qoq s.a)—the best reading since Q3 2022—bolstered by front-loaded sales ahead of U.S. tariffs and recovering momentum in Germany, the top trading partner. Imports of goods and services also bounced back, expanding by 2.1% in Q1 (Q4 2024: -1.8% qoq s.a.), capping the overall contribution of net exports to quarterly GDP growth.

Growth to soften ahead: Our Consensus is for GDP growth to lose traction from Q1’s strong sequential pace in the coming quarters as rising trade frictions pose headwinds. That said, in 2025 as a whole, economic growth should double from 2024’s level. The monetary easing cycle should fuel a rebound in fixed investment, while stronger EU demand is set to support exports. Moreover, healthy real wage growth should bolster consumer spending. That said, rising EU-U.S. trade tensions prompted our panelists to trim their 2025 GDP growth forecasts since January, projecting momentum to remain below the pre-pandemic 10-year average of 2.5%. Higher-than-expected U.S. tariffs and a weaker-than-anticipated German economy are downside risks.

Panelist insight: Commenting on the outlook, ING’s David Havrlant, stated: “The outlook for solid and sustainable growth in the Czech economy appears increasingly uncertain – despite the recent upside surprise in headline GDP figures. Slower expansion implies a more gradual improvement in potential output, a prolonged period of operating below capacity, subdued inflationary pressures, and, consequently, greater scope for lower nominal interest rates.” On a more positive note, Jiri Polanski, analyst at Erste Bank, stated: “Economic improvement in the coming years is expected to be driven primarily by increased foreign demand for Czech exports, alongside the anticipated recovery in the German (and European) economy. We are currently updating our forecast. Recent data suggests slightly higher GDP growth for this year, […] due to a better-than-expected first quarter and the postponement of U.S. reciprocal tariffs by Trump shortly after their introduction (we had instead expected gradual reductions as negotiations progressed).”

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