Growth in economic activity comes in below CNB forecast in Q3
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 1.9% year on year in 2016 Q3. In quarter-on-quarter terms, economic activity increased by 0.2%. Compared to the CNB forecast, the economic growth recorded in Q3 is 0.6 percentage point lower in both year-on-year and quarter-on-quarter terms.
The downward deviation of annual GDP growth in 2016 Q3 from the CNB forecast was due mainly to a lower contribution of net exports, as both exports and imports increased at a much slower rate than forecasted by the CNB. Growth in government consumption also lagged somewhat behind the CNB’s expectations. A smaller decline in gross capital formation – due to both a smaller decline in fixed investment and a larger increase in inventories – had the opposite effect on the deviation of GDP from the forecast. However, the expectation of a continued major negative effect of the decline in government investment due to an only gradual start of the new programme period for EU funds this year is continuing to materialise. Growth in household consumption rose again, entirely in line with the forecast. This confirmed the CNB’s view that the previous slowdown in household consumption was temporary in nature.
Overall, annual growth in the Czech economy slowed further as expected in 2016 Q3, albeit to a greater extent than forecasted by the CNB. According to the central bank’s forecast, GDP growth will stand at 2.8% this year, amid a temporary decline in investment co-financed from EU funds. GDP growth will continue to record similar rates as this year in the next two years. Growth in investment will resume, but a temporary slowdown in external demand and later also less easy monetary conditions following the discontinuation of the CNB’s exchange rate commitment will have an opposite effect.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the GDP figures for 2016 Q3
Growth in economic activity comes in below CNB forecast in Q3
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 1.9% year on year in 2016 Q3. In quarter-on-quarter terms, economic activity increased by 0.2%. Compared to the CNB forecast, the economic growth recorded in Q3 is 0.6 percentage point lower in both year-on-year and quarter-on-quarter terms.
The downward deviation of annual GDP growth in 2016 Q3 from the CNB forecast was due mainly to a lower contribution of net exports, as both exports and imports increased at a much slower rate than forecasted by the CNB. Growth in government consumption also lagged somewhat behind the CNB’s expectations. A smaller decline in gross capital formation – due to both a smaller decline in fixed investment and a larger increase in inventories – had the opposite effect on the deviation of GDP from the forecast. However, the expectation of a continued major negative effect of the decline in government investment due to an only gradual start of the new programme period for EU funds this year is continuing to materialise. Growth in household consumption rose again, entirely in line with the forecast. This confirmed the CNB’s view that the previous slowdown in household consumption was temporary in nature.
Overall, annual growth in the Czech economy slowed further as expected in 2016 Q3, albeit to a greater extent than forecasted by the CNB. According to the central bank’s forecast, GDP growth will stand at 2.8% this year, amid a temporary decline in investment co-financed from EU funds. GDP growth will continue to record similar rates as this year in the next two years. Growth in investment will resume, but a temporary slowdown in external demand and later also less easy monetary conditions following the discontinuation of the CNB’s exchange rate commitment will have an opposite effect.
Tomáš Holub, Executive Director, Monetary Department