According to the CZSO’s estimate released today, gross domestic product adjusted for price, seasonal and calendar effects rose by 2.7% year on year in 2019 Q2. In quarter-on-quarter terms, economic activity increased by 0.7%.
The annual growth of the Czech economy in 2019 Q2 was in line with the CNB forecast. Nevertheless, partial deviations were recorded in the individual demand components. Contrary to expectations, net exports made a positive contribution to GDP growth, with exports of goods and services rising slightly faster and imports of goods and services slightly more slowly than forecasted. Government consumption growth was somewhat higher than forecasted. Conversely, growth in gross capital formation was lower than forecasted due to lower-than-expected growth in fixed investment and inventories. Household consumption grew at a marginally slower rate than forecasted in Q2.
The published figures overall bear out the message of the CNB’s current forecast. According to the forecast, the Czech economy will grow by 2.6% this year. The GDP growth will be driven by all components of final domestic demand. Still solid growth in household consumption will reflect continuing, albeit gradually slowing, growth in household income. Corporate investment will be motivated by increasing demand and persisting labour shortages. Government investment will also grow, with a significant contribution of projects co-financed from EU funds. Fiscal policy will also contribute positively to domestic demand growth this year via a rise in public sector pay, pensions and social benefits. According to the forecast, net exports, by contrast, will hinder economic growth this year, owing to temporarily slower growth in external demand and persisting capacity constraints in the domestic economy. Next year, the negative contribution of net exports to GDP growth will fade out on account of faster export growth.
Luboš Komárek, Deputy Executive Director, Monetary Department