GDP growth gains steam in Q3

Economy grows faster than expected: The economy gained traction in the third quarter, as GDP growth accelerated to 0.5% on a seasonally and calendar-adjusted quarter-on-quarter basis from a downwardly revised 0.2% in Q2. The pickup marked the best result since Q1 2022, exceeding the flash estimate of 0.3%. Similarly, calendar- and seasonally adjusted annual economic growth accelerated to 1.4% in Q3 compared to the previous quarter's downwardly revised 0.5% expansion, marking the best result in two years.

Private consumption in the driver’s seat: Private consumption was the main engine of Q3’s quarterly upturn, expanding 0.7% in seasonally adjusted quarter-on-quarter terms, contrasting Q2’s flat result. That said, government spending flatlined in Q3, deteriorating from Q2’s 1.6% rise and logging the worst result since Q1 2022. Moreover, fixed investment returned to the doldrums, contracting 1.2% in Q3 (Q2: +1.5% qoq s.a.). On the external front, exports of goods and services growth picked up to 1.9% in sequential terms in the third quarter (Q2: +0.8% qoq s.a.), marking the best reading since Q3 2022. However, imports of goods and services growth accelerated to 3.2% in Q3 (Q2: +1.1% qoq s.a.), dragging on the overall result.

Lower inflation and interest rates to boost growth in 2025: Our panelists expect sequential GDP growth to remain around current levels in coming quarters. Looking at 2025 as a whole, economic growth should more than double from 2024’s projected figure, hovering around its 2014–2023 average of 2.3%. The acceleration will come on the back of faster household consumption growth, underpinned by lower inflation, and a recovery in fixed investment, benefiting from laxer financing conditions.

Panelist insight: Commenting on the risks to the outlook, Jiri Polansky, analyst at Erste Bank, stated: “The risks are balanced, with ongoing weak performance in Germany on one side and the potential for stronger investment, particularly related to flood repairs, on the other. A more significant acceleration in the growth of the Czech economy is anticipated next year (2.3%), alongside an improvement in external demand.”

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