According to the CZSO’s estimate released today, gross domestic product adjusted for price, seasonal and calendar effects dropped by 5% year on year in 2020 Q3. In quarter-on-quarter terms, economic activity increased by almost 7%.
The year-on-year decline of the Czech economy in 2020 Q3 was smaller than the CNB’s forecast had expected. This was due mainly to an unexpectedly positive contribution of net exports to GDP growth. By comparison with the forecast, this contribution reflected above all a much more moderate decline in exports of goods and services, with an only slightly smaller-than-expected decrease in imports. Gross fixed investment formation and additions to inventories, which were adversely affected by the impacts of the pandemic, recorded a much larger decline than forecasted. Government consumption was flat year on year, whereas the forecast had expected its buoyant growth. Household consumption was broadly in line with the forecast in an environment of huge uncertainty.
The published data confirm the starting point of the CNB’s current forecast that the economy partly began to breathe again after the lifting of most of the epidemiological restrictions during the summer months. At the same time, however, they document the high uncertainty arising from the unprecedented developments connected with the pandemic this year. The forecast expects the economy to decline again in autumn as a result of the second wave of the pandemic and the negative economic impacts of the reintroduction of measures to curb the spread of the virus. According to the assumptions of the baseline scenario of the current forecast, the restrictive effect of the autumn anti-epidemic measures peaked in November 2020. The restrictions will be partly relaxed before Christmas. During the first half of 2021, the measures will be eased further to this summer’s level, owing to an expected improvement in the epidemic situation. This will enable most sectors of the economy to open up gradually again. However, the negative impacts of subdued external demand, worse global economic sentiment and a very unfavourable perception of the economic situation among Czech households and firms will persist. This will dampen the return of fixed investment to growth. GDP growth will be moderate next year, driven mainly by household consumption and net exports amid gradually recovering external demand. GDP will accelerate further in 2022, but economic activity will not reach the pre-pandemic level even by the end of that year.
Petr Král, Executive Director, Monetary Department
GDP comes in above the CNB forecast in 2020 Q3
The CNB comments on the GDP figures for 2020 Q3
According to the CZSO’s estimate released today, gross domestic product adjusted for price, seasonal and calendar effects dropped by 5% year on year in 2020 Q3. In quarter-on-quarter terms, economic activity increased by almost 7%.
The year-on-year decline of the Czech economy in 2020 Q3 was smaller than the CNB’s forecast had expected. This was due mainly to an unexpectedly positive contribution of net exports to GDP growth. By comparison with the forecast, this contribution reflected above all a much more moderate decline in exports of goods and services, with an only slightly smaller-than-expected decrease in imports. Gross fixed investment formation and additions to inventories, which were adversely affected by the impacts of the pandemic, recorded a much larger decline than forecasted. Government consumption was flat year on year, whereas the forecast had expected its buoyant growth. Household consumption was broadly in line with the forecast in an environment of huge uncertainty.
The published data confirm the starting point of the CNB’s current forecast that the economy partly began to breathe again after the lifting of most of the epidemiological restrictions during the summer months. At the same time, however, they document the high uncertainty arising from the unprecedented developments connected with the pandemic this year. The forecast expects the economy to decline again in autumn as a result of the second wave of the pandemic and the negative economic impacts of the reintroduction of measures to curb the spread of the virus. According to the assumptions of the baseline scenario of the current forecast, the restrictive effect of the autumn anti-epidemic measures peaked in November 2020. The restrictions will be partly relaxed before Christmas. During the first half of 2021, the measures will be eased further to this summer’s level, owing to an expected improvement in the epidemic situation. This will enable most sectors of the economy to open up gradually again. However, the negative impacts of subdued external demand, worse global economic sentiment and a very unfavourable perception of the economic situation among Czech households and firms will persist. This will dampen the return of fixed investment to growth. GDP growth will be moderate next year, driven mainly by household consumption and net exports amid gradually recovering external demand. GDP will accelerate further in 2022, but economic activity will not reach the pre-pandemic level even by the end of that year.
Petr Král, Executive Director, Monetary Department