GDP comes in above the CNB forecast in 2021 Q3

The CNB comments on the GDP figures for 2021 Q3

According to the CZSO’s estimate released today, gross domestic product adjusted for price, seasonal and calendar effects rose by 3.1% year on year in 2021 Q3. In quarter-on-quarter terms, economic activity increased by 1.5%. The year-on-year growth of the Czech economy in 2021 Q3 was one percentage point higher than the CNB’s forecast had expected.

The released data confirm that the recovery of the Czech economy continued during the summer. While the year-on-year growth rate of the economy in Q3 naturally slowed markedly due to base effects, quarter-on-quarter growth remained high. GDP growth was driven solely by domestic demand, especially final consumption expenditure of households and general government, as well as a rise in inventories. All these components of domestic demand recorded faster year-on-year growth compared with the forecast. Continued strong growth in household consumption was aided by almost unrestricted functioning of services and trade during the summer, as well as an improving labour market situation and probably also a gradual release of savings built up during previous shutdowns of the economy. Buoyant growth in government consumption reflected above all continued extraordinary expenditure in health care. The forecast for gross capital formation materialised, but its double-digit growth primarily reflected an accelerating contribution of rising inventories. The latter was largely due to forced stockpiling of unfinished production owing to disruptions to international production chains and related logistics. By contrast, fixed capital investment moderated in Q3. Exports of goods and services declined in Q3 due to an escalation of the problems in global production and supply chains. By contrast, import growth remained in positive territory owing to solid domestic demand growth. As a result, the contribution of net exports to GDP growth was strongly negative, broadly in line with the forecast. 

2021 Q3 year-on-year in %
MPR Autumn 2021 actual figure
Gross domestic product 2.1 3.1
Household consumption 4.2 6.4
Government consumption 3.7 5.0
Gross capital formation 24.9 25.2
Exports of goods and services 2.9 -2.3
Imports of goods and services 13.8 8.3

constant prices, seasonally adjusted

At the close of this year, the Czech economy will continue to face problems with supplies of components from abroad leading to cutting back on production especially in the automotive industry. However, partly thanks to immediate fiscal support, this will have no strong negative impacts on other areas of the economy. Moreover, these complications will fade out in the first half of next year, fostering a recovery in exports and a subsequent relatively swift recovery in economic growth. According to the assumptions of the forecast, the tightening of anti-epidemic measures will have no tangible economic impacts. GDP will thus grow by almost 2% overall this year and its growth will pick up considerably over the next two years.  This will continue to be fostered by increasing household consumption, benefiting among other things from the spending of part of forced savings and swift wage growth on the labour market, which is overheating again. Solid external demand and labour shortages will boost firms’ investment activity, and government investment will also rise. Domestic economic activity will return to the pre-pandemic level at the end of 2022.

Petr Král, Executive Director, Monetary Department