Investment in Czech Republic

Czech Republic - Investment

Economy expands at slower pace in Q3

The economy expanded 2.8% in seasonally-adjusted year-on-year terms in the third quarter, following Q2’s 8.1% increase, supported by progress on the vaccination front and easing restrictions but weighed down by a waning base effect. Meanwhile, output increased 1.4% on a seasonally-adjusted quarter-on-quarter basis in Q3. The expansion followed the 1.0% rise recorded in Q2.

Although a detailed breakdown is yet to be released, household and capital spending, as well as government consumption, made positive contributions to growth, while external demand negatively affected the reading. On the supply side, the trade, transportation, accommodation and food services sectors led the recovery, while the manufacturing sector contracted, likely restrained by supply bottlenecks.

More detailed national accounts data for Q3 will be released on 30 November.

Commenting on the growth outlook in the remainder of the year and in 2022, Jiri Polansky, analyst at Erste Bank, said:

“The Czech economy is now experiencing a slowdown, which will intensify further in the fourth quarter. This is mainly due to problems in the automotive industry, where there has been a strong reduction in production, as well as rising energy prices, which have been forcing several firms to reduce their production. In addition, rising energy prices may also have a negative impact on household consumption. According to our current forecast, we expect GDP growth to come in at 3.3% this year and 4.7% next year. However, recent data indicate GDP growth should be lower this year (around 2.5%–3.0%) and slightly higher in 2022. But this will strongly depend on whether the supply of components for the automotive sector will be improving next year.”

FocusEconomics analysts see GDP expanding 4.6% in 2022, which is down 0.1 percentage points from last month’s forecast, and 3.6% in 2023.