Growth in economic activity was slightly above CNB forecast at start of this year.
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 3% year on year in 2016 Q1. In quarter-on-quarter terms, economic activity increased by 0.4%. Compared to the CNB forecast, the economic growth recorded in Q1 is 0.4 percentage point higher in both year-on-year and quarter-on-quarter terms.
The upward deviation of annual GDP growth in 2016 Q1 from the CNB forecast was due mainly to higher additions to inventories. By contrast, the CNB’s expectation that the previous fast annual rise in fixed investment would almost halt at the start of this year materialised. In line with the assumptions, this reflected the only gradual start to the new EU fund programme period, which is depressing general government investment. Annual growth in household consumption was slightly above the forecast. Its persisting robust growth continues to reflect favourable developments in the labour market. Conversely, growth in government consumption was slightly below the forecast. Growth in exports of goods and services was slightly higher than expected, while growth in imports exceeded the forecast more significantly, probably in part due to the above-mentioned additions to inventories. Net exports thus increased by less than expected by the CNB in year-on-year terms.
Overall, annual growth in the Czech economy in 2016 Q1 slowed as expected, although to a lesser extent than forecasted by the CNB. According to the central bank’s forecast, growth of the Czech economy will slow to 2.3% this year, owing to a temporary decrease in gross capital formation, which will reflect mainly a drop in government investment co-financed from EU funds. However, the economy will continue to be supported by easy domestic monetary conditions via the weakened koruna and exceptionally low interest rates. Still relatively low oil prices and rising external demand are also fostering economic growth. Domestic economic growth will pick up again to 3.4% next year, with positive contributions from all demand components except inventories.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the GDP figures for 2016 Q1
Growth in economic activity was slightly above CNB forecast at start of this year.
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 3% year on year in 2016 Q1. In quarter-on-quarter terms, economic activity increased by 0.4%. Compared to the CNB forecast, the economic growth recorded in Q1 is 0.4 percentage point higher in both year-on-year and quarter-on-quarter terms.
The upward deviation of annual GDP growth in 2016 Q1 from the CNB forecast was due mainly to higher additions to inventories. By contrast, the CNB’s expectation that the previous fast annual rise in fixed investment would almost halt at the start of this year materialised. In line with the assumptions, this reflected the only gradual start to the new EU fund programme period, which is depressing general government investment. Annual growth in household consumption was slightly above the forecast. Its persisting robust growth continues to reflect favourable developments in the labour market. Conversely, growth in government consumption was slightly below the forecast. Growth in exports of goods and services was slightly higher than expected, while growth in imports exceeded the forecast more significantly, probably in part due to the above-mentioned additions to inventories. Net exports thus increased by less than expected by the CNB in year-on-year terms.
Overall, annual growth in the Czech economy in 2016 Q1 slowed as expected, although to a lesser extent than forecasted by the CNB. According to the central bank’s forecast, growth of the Czech economy will slow to 2.3% this year, owing to a temporary decrease in gross capital formation, which will reflect mainly a drop in government investment co-financed from EU funds. However, the economy will continue to be supported by easy domestic monetary conditions via the weakened koruna and exceptionally low interest rates. Still relatively low oil prices and rising external demand are also fostering economic growth. Domestic economic growth will pick up again to 3.4% next year, with positive contributions from all demand components except inventories.
Tomáš Holub, Executive Director, Monetary Department