Growth in economic activity below the CNB forecast
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 1.1% year on year in 2010 Q1. In quarter-on-quarter terms, it was up by 0.5%. This increase in economic activity is lower than the current CNB forecast – by 0.7 percentage point in year-on-year terms and 0.3 percentage point in quarter-on-quarter terms. The difference between these deviations is due mainly to a revision of the data for the individual quarters of 2009 by the CZSO.
Looking at the demand side of the economy in more detail, the lower GDP growth largely reflects a smaller-than-expected improvement in net exports. While exports of goods and services fell short of the CNB forecast by roughly 1 percentage point, imports were slightly higher than forecasted. Foreign trade thus made a positive contribution to the growth in economic activity, but it was not as strong as the central bank had predicted. Growth in government consumption was also considerably lower than forecasted. By contrast, household consumption and aggregate investment were higher than predicted. Both these key components of domestic demand fell year on year, but at a slower-than-forecasted pace.
Although GDP was below the CNB forecast in 2010 Q1, overall the data released today confirm that the Czech economy bottomed out in mid-2009 and economic activity is now gradually recovering. However, this recovery is not rapid and it probably will not be smooth over the course of this year. This is because it will be adversely affected by fluctuations in the recovery in external demand, a fading of the effect of some anti-crisis measures abroad (e.g. car-scrapping incentives) and still falling household consumption in the Czech Republic due to the subdued labour market and the impacts of fiscal austerity measures. In 2010 as a whole, the CNB forecast expects GDP to rise by only 1.4% on average. A stronger economic recovery will occur during 2011 as growth abroad picks up pace and the decline in domestic demand comes to a halt.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the GDP figures for 2010 Q1
Growth in economic activity below the CNB forecast
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 1.1% year on year in 2010 Q1. In quarter-on-quarter terms, it was up by 0.5%. This increase in economic activity is lower than the current CNB forecast – by 0.7 percentage point in year-on-year terms and 0.3 percentage point in quarter-on-quarter terms. The difference between these deviations is due mainly to a revision of the data for the individual quarters of 2009 by the CZSO.
Looking at the demand side of the economy in more detail, the lower GDP growth largely reflects a smaller-than-expected improvement in net exports. While exports of goods and services fell short of the CNB forecast by roughly 1 percentage point, imports were slightly higher than forecasted. Foreign trade thus made a positive contribution to the growth in economic activity, but it was not as strong as the central bank had predicted. Growth in government consumption was also considerably lower than forecasted. By contrast, household consumption and aggregate investment were higher than predicted. Both these key components of domestic demand fell year on year, but at a slower-than-forecasted pace.
Although GDP was below the CNB forecast in 2010 Q1, overall the data released today confirm that the Czech economy bottomed out in mid-2009 and economic activity is now gradually recovering. However, this recovery is not rapid and it probably will not be smooth over the course of this year. This is because it will be adversely affected by fluctuations in the recovery in external demand, a fading of the effect of some anti-crisis measures abroad (e.g. car-scrapping incentives) and still falling household consumption in the Czech Republic due to the subdued labour market and the impacts of fiscal austerity measures. In 2010 as a whole, the CNB forecast expects GDP to rise by only 1.4% on average. A stronger economic recovery will occur during 2011 as growth abroad picks up pace and the decline in domestic demand comes to a halt.
Tomáš Holub, Executive Director, Monetary and Statistics Department