Czech Republic: Economy slows down moderately in second quarter
September 8, 2011
In the second quarter, GDP grew 2.2% over the same quarter last year, according to revised data published on 8 September. The updated figure was below the 2.4% expansion initially recorded in the 16 August estimate and represented a slowdown compared to the 2.8% expansion observed in the first quarter. The second quarter deceleration mainly reflected a deterioration in total consumption. Private consumption contracted 0.7% year-on-year, below the 0.4% drop tallied in the previous quarter. In the same vein, government consumption fell 1.4% in the second quarter, which marked the fourth consecutive period mired in the red as austerity measures adopted by the government began to bite. In contrast, gross fixed investment increased 3.6% in Q2, which was slightly faster than the 3.4% expansion observed in Q1. Meanwhile, both exports and imports continued to grow, albeit at a slower pace. Exports of goods and services expanded 9.4% in the second quarter, slower than the 14.8% increase in the first quarter. Imports decelerated from a 12.7% increase in Q1 to a 7.9% expansion in Q2. As a result, the net contribution from the external sector to economic growth deteriorated from a 2.6 percentage-point contribution in Q1 to a 1.9 percentage-point contribution in Q2. At the sector level, the deceleration in the second quarter was broad-based, as all three main sectors of the economy slowed over the previous quarter, particularly manufacturing, which decelerated from a 14.6% expansion in Q1 to a 9.7% increase in Q2. A quarter-on-quarter comparison confirms the slowdown suggested by the annual figures, as GDP grew a seasonally and working-day adjusted 0.1% over the previous quarter, below the first quarter's 0.9% expansion. The Central Bank sees the economy growing 2.1% this year, while the Bank revised its growth estimates for 2012 and now expects the economy to expand 2.2%, down from its previous 2.8% estimate. Monetary authorities argued that the austerity measures adopted by the government this year are likely to continue to dent economic growth in the coming year.
Author: Ricardo Aceves, Senior Economist