Growth in economic activity was slightly above CNB forecast at start of this year
The CNB comments on the GDP figures for 2017 Q1
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 2.9% year on year in 2017 Q1. In quarter-on-quarter terms, economic activity increased by 1.3%. Compared to the CNB forecast, the economic growth recorded at the start of this year is 0.4 percentage point higher in both year-on-year and quarter-on-quarter terms.
The upward deviation of annual GDP growth from the CNB forecast was due to higher-than-forecasted gross capital formation. It reflected a greater moderation of the decline in fixed investment. This confirms an unwinding of the negative effect of last year’s decline in government investment due to an only gradual start to the new programme period for EU funds. At the same time, growth in private investment in machinery and equipment and transport equipment recovered significantly. The higher-than-expected gross capital formation was also due to a less negative contribution of change in inventories. Annual growth in government consumption was also rather higher than expected by the CNB. By contrast, growth in household consumption was slightly lower than forecasted. Nonetheless, this component of demand remains the strongest and most stable driver of domestic economic growth. The positive contribution of net exports was also somewhat lower than forecasted, as total import growth exceeded the CNB’s expectations slightly more than export growth. Nevertheless, the observed upswing in exports of goods and services at the start of this year confirmed the CNB’s view that their slowdown at the end of 2016 was only temporary.
Overall, growth in the Czech economy in 2017 Q1 accelerated as expected, and to an even greater extent than forecasted by the CNB. The current CNB forecast expects GDP to grow by almost 3% in 2017 and to remain at a similar level in 2018. The domestic economy will thus remain close to its potential output level. Growth in domestic economic activity will be driven mainly by robust growth in household consumption, reflecting consumer optimism in an environment of continued growth in employment and wages. Investment, especially in the government sector, will recover as a result of renewed drawdown of EU funds. In addition, the Czech economy will continue to benefit from ongoing demand growth in the Czech Republic’s main trading partner countries. However, the positive contribution of net exports to Czech economic growth will disappear gradually as a result of an acceleration in domestic demand, which will increase imports, and an appreciation of the koruna.
Tomáš Holub, Executive Director, Monetary Department
Growth in economic activity was slightly above CNB forecast at start of this year
The CNB comments on the GDP figures for 2017 Q1
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 2.9% year on year in 2017 Q1. In quarter-on-quarter terms, economic activity increased by 1.3%. Compared to the CNB forecast, the economic growth recorded at the start of this year is 0.4 percentage point higher in both year-on-year and quarter-on-quarter terms.
The upward deviation of annual GDP growth from the CNB forecast was due to higher-than-forecasted gross capital formation. It reflected a greater moderation of the decline in fixed investment. This confirms an unwinding of the negative effect of last year’s decline in government investment due to an only gradual start to the new programme period for EU funds. At the same time, growth in private investment in machinery and equipment and transport equipment recovered significantly. The higher-than-expected gross capital formation was also due to a less negative contribution of change in inventories. Annual growth in government consumption was also rather higher than expected by the CNB. By contrast, growth in household consumption was slightly lower than forecasted. Nonetheless, this component of demand remains the strongest and most stable driver of domestic economic growth. The positive contribution of net exports was also somewhat lower than forecasted, as total import growth exceeded the CNB’s expectations slightly more than export growth. Nevertheless, the observed upswing in exports of goods and services at the start of this year confirmed the CNB’s view that their slowdown at the end of 2016 was only temporary.
Overall, growth in the Czech economy in 2017 Q1 accelerated as expected, and to an even greater extent than forecasted by the CNB. The current CNB forecast expects GDP to grow by almost 3% in 2017 and to remain at a similar level in 2018. The domestic economy will thus remain close to its potential output level. Growth in domestic economic activity will be driven mainly by robust growth in household consumption, reflecting consumer optimism in an environment of continued growth in employment and wages. Investment, especially in the government sector, will recover as a result of renewed drawdown of EU funds. In addition, the Czech economy will continue to benefit from ongoing demand growth in the Czech Republic’s main trading partner countries. However, the positive contribution of net exports to Czech economic growth will disappear gradually as a result of an acceleration in domestic demand, which will increase imports, and an appreciation of the koruna.
Tomáš Holub, Executive Director, Monetary Department