According to the CZSO's preliminary estimate, real GDP increased by 6.9% year on year in 2005
Q4, compared to a revised 5.8% in Q3. Economic growth in 2005 as a whole came in at a record
6.0%.
The published figure was much higher than the CNB's January forecast, which had conversely
expected a modest slowdown in growth. Part of this deviation can be attributed to the revision of
the previous quarter's data. The estimated annual growth for Q3 was increased from 4.9% to 5.8%.
The new data thus point to a permanent and dynamic upswing in growth, not a stagnation or modest
decline.
By contrast, the data on the structure of demand in the economy do not deviate much from the CNB'
s forecast, showing just partial differences. (This apparent paradox is due, among other things, to
the fact that, in line with current CZSO practice, real GDP is not obtained by summing the
individual expenditure items, but is derived indirectly using the chain index method.) The growth
continues to be driven by foreign trade in goods and services at constant prices, whose outturn was
in line with the CNB's forecast. As expected, household consumption growth remains subdued.
Government consumption is decreasing moderately, although at a slower rate than predicted. Fixed
investment growth was somewhat higher than forecasted, but this was mainly due to the previous data
revision, with no signs of any sizeable pick-up relative to the preceding quarter.
The rapid economic growth has not yet been accompanied by any visible demand-pull inflationary
pressures. This suggests that the above results are largely due to changes on the supply side of
the economy. Consistent with this is the substantial contribution to value added growth from
manufacturing, which saw the launch of several new facilities last year. The growth of the economy
was also strongly supported by the services sector.
A less positive aspect of last year's developments was a deterioration in the terms of trade,
caused by falling prices of Czech exports not being accompanied by a proportional decline in import
prices. The trade balance at current prices was therefore less favourable than net exports at
constant prices. Owing to the above trend, real gross domestic income grew much less (+4.2%) than
GDP.
Tomáš Holub
Executive Director, Monetary and Statistics Department
The CNB comments on the GDP figures for 2005 Q4
Economic growth greatly exceeds CNB forecast
According to the CZSO's preliminary estimate, real GDP increased by 6.9% year on year in 2005 Q4, compared to a revised 5.8% in Q3. Economic growth in 2005 as a whole came in at a record 6.0%.
The published figure was much higher than the CNB's January forecast, which had conversely expected a modest slowdown in growth. Part of this deviation can be attributed to the revision of the previous quarter's data. The estimated annual growth for Q3 was increased from 4.9% to 5.8%. The new data thus point to a permanent and dynamic upswing in growth, not a stagnation or modest decline.
By contrast, the data on the structure of demand in the economy do not deviate much from the CNB' s forecast, showing just partial differences. (This apparent paradox is due, among other things, to the fact that, in line with current CZSO practice, real GDP is not obtained by summing the individual expenditure items, but is derived indirectly using the chain index method.) The growth continues to be driven by foreign trade in goods and services at constant prices, whose outturn was in line with the CNB's forecast. As expected, household consumption growth remains subdued. Government consumption is decreasing moderately, although at a slower rate than predicted. Fixed investment growth was somewhat higher than forecasted, but this was mainly due to the previous data revision, with no signs of any sizeable pick-up relative to the preceding quarter.
The rapid economic growth has not yet been accompanied by any visible demand-pull inflationary pressures. This suggests that the above results are largely due to changes on the supply side of the economy. Consistent with this is the substantial contribution to value added growth from manufacturing, which saw the launch of several new facilities last year. The growth of the economy was also strongly supported by the services sector.
A less positive aspect of last year's developments was a deterioration in the terms of trade, caused by falling prices of Czech exports not being accompanied by a proportional decline in import prices. The trade balance at current prices was therefore less favourable than net exports at constant prices. Owing to the above trend, real gross domestic income grew much less (+4.2%) than GDP.
Tomáš Holub
Executive Director, Monetary and Statistics Department