Depth of the decline in economic activity broadly in line with the CNB forecast in 2020 Q2
The CNB comments on the GDP figures for 2020 Q2
According to the CZSO’s estimate released today, gross domestic product adjusted for price, seasonal and calendar effects dropped by 11% year on year in 2020 Q2. In quarter-on-quarter terms, economic activity decreased by 8.7%.
The decline of the Czech economy was one percentage point smaller than the CNB’s forecast had expected. In view of the unprecedented situation of the Czech economy during the spring months, the observed deviation of the actual GDP figures from the forecast can be considered insignificant. Household consumption was almost fully in line with the forecast, recording a sizeable decrease owing to the quarantine measures. Net exports were also in line with the forecast, amid a slightly smaller decrease in both exports and imports. The year-on-year drop in gross capital formation deepened but was less pronounced than in forecast as a result of an unexpected moderation of the decline in fixed investment. This was partly offset by a negative contribution of change in inventories, whereas the forecast had expected it to return to a positive effect. As expected, government consumption maintained year-on-year growth, which was, however, rather slower than predicted.
The published data confirm the strongly negative impacts of the coronavirus pandemic and the related decline in external demand and government quarantine measures on the domestic economy during the spring months. Although the quarantine measures were almost fully lifted in the summer, lower external demand, a marked rise in unemployment and a generally worse perception of the economic situation among Czech firms and households will continue to dampen economic activity in the quarters ahead. According to the CNB’s current forecast, GDP will fall by around 8% overall this year and economic activity will return to growth next year. However, the economy will not reach the pre-pandemic level until the end of 2022. The drop in GDP this year will be due mainly to a fall in private investment. The recovery in private investment will be dampened by low external demand associated with the significantly worse global economic sentiment. For the same reasons, the export performance of Czech firms will also decrease sharply. This will be reflected in a negative contribution of net exports to GDP growth. By contrast, the negative impacts of the coronavirus pandemic will continue to be moderated by growth in government consumption coupled with stabilising budgetary measures, which are supporting household consumption above all.
Petr Král, Executive Director, Monetary Department
Depth of the decline in economic activity broadly in line with the CNB forecast in 2020 Q2
The CNB comments on the GDP figures for 2020 Q2
According to the CZSO’s estimate released today, gross domestic product adjusted for price, seasonal and calendar effects dropped by 11% year on year in 2020 Q2. In quarter-on-quarter terms, economic activity decreased by 8.7%.
The decline of the Czech economy was one percentage point smaller than the CNB’s forecast had expected. In view of the unprecedented situation of the Czech economy during the spring months, the observed deviation of the actual GDP figures from the forecast can be considered insignificant. Household consumption was almost fully in line with the forecast, recording a sizeable decrease owing to the quarantine measures. Net exports were also in line with the forecast, amid a slightly smaller decrease in both exports and imports. The year-on-year drop in gross capital formation deepened but was less pronounced than in forecast as a result of an unexpected moderation of the decline in fixed investment. This was partly offset by a negative contribution of change in inventories, whereas the forecast had expected it to return to a positive effect. As expected, government consumption maintained year-on-year growth, which was, however, rather slower than predicted.
The published data confirm the strongly negative impacts of the coronavirus pandemic and the related decline in external demand and government quarantine measures on the domestic economy during the spring months. Although the quarantine measures were almost fully lifted in the summer, lower external demand, a marked rise in unemployment and a generally worse perception of the economic situation among Czech firms and households will continue to dampen economic activity in the quarters ahead. According to the CNB’s current forecast, GDP will fall by around 8% overall this year and economic activity will return to growth next year. However, the economy will not reach the pre-pandemic level until the end of 2022. The drop in GDP this year will be due mainly to a fall in private investment. The recovery in private investment will be dampened by low external demand associated with the significantly worse global economic sentiment. For the same reasons, the export performance of Czech firms will also decrease sharply. This will be reflected in a negative contribution of net exports to GDP growth. By contrast, the negative impacts of the coronavirus pandemic will continue to be moderated by growth in government consumption coupled with stabilising budgetary measures, which are supporting household consumption above all.
Petr Král, Executive Director, Monetary Department