Česká národní banka

The CNB comments on the GDP figures for 2017 Q3

1 Dec 2017

Growth in economic activity in line with CNB forecast in Q3

According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 5% year on year in 2017 Q3. In quarter-on-quarter terms, economic activity increased by 0.5%. The economic growth recorded in Q3 was thus fully in line with the CNB forecast in both year-on-year and quarter-on-quarter terms.

Turning to the structure of annual GDP growth, only small deviations from the CNB forecast were recorded. In line with the CNB’s expectations, household consumption continued to rise apace in Q3, still reflecting the strong labour market and resulting higher household income. The continuing moderate year-on-year growth in government consumption came as no surprise either. The CNB’s expectations that fixed investment would maintain its high pace of growth in 2017 Q3 were also confirmed. The impact on GDP of the slightly higher-than-expected contribution of change in inventories was offset by a slightly lower positive contribution of net exports.

Overall, the annual growth of the Czech economy accelerated further in 2017 Q3, in line with the CNB’s expectations. According to the CNB’s current forecast, Czech economic growth will reach 4.5% this year and will slow in the following two years. The economy will remain above its potential output level. The increase in domestic economic activity will be driven mainly by robust growth in household consumption, reflecting optimism of consumers in an environment of high growth in their income. Investment will also continue to rise, not only in the private sector, but also in the government sector as a result of higher drawdown of EU funds. Fiscal policy will also contribute to domestic demand growth via a significant rise in public sector pay and increasing pensions and social benefits. The economy will continue to benefit from stable demand growth in the Czech Republic’s main trading partner countries. However, the positive contribution of net exports to GDP growth will disappear gradually as a result of appreciation of the koruna and an acceleration in import-intensive domestic demand. A tightening of both the exchange rate and interest rate components of monetary policy will act against overheating of the domestic economy.

Tomáš Holub, Executive Director, Monetary Department