The economy declines by more than forecasted by the CNB
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects dropped by 3.4 % both in year-on-year and quarter-on-quarter terms in 2009 Q1.
The above quarter-on-quarter seasonally adjusted decline in real GDP in 2009 Q1 suggests a more pronounced economic downturn compared to the CNB’s forecast, which had assumed a less marked fall in economic activity. The CZSO has at the same time revised the time series for GDP growth in 2005-2008, which shows that a modest annual GDP decrease occurred already in 2008 Q4. In view of this fact, and particularly due to the above mentioned stronger quarter-on-quarter fall in economic activity, the reported annual GDP decline in 2009 Q1 (of 3.4%) was 0.9 percentage point higher than the current CNB forecast (a fall of 2.5%).
As regards the structure of economic growth, real growth in household and government consumption was higher than the CNB had expected. By contrast, gross capital formation recorded a dramatic fall, remaining far behind the CNB’s expectations owing to the evolution of fixed investment and particularly inventories. Similarly, the growth rates of both exports and imports of goods and services fell to much more negative values than expected. However, the deterioration in net exports was somewhat more modest than assumed by the CNB. Gross value added at constant prices dropped by 3.2% year on year. This was mostly due to the downturn in manufacturing resulting from a sharp decline in external demand. Significant year-on-year declines were recorded also in wholesale and retail trade and repair of motor vehicles, financial intermediation and insurance, and construction. By contrast, value added increased in electricity, gas and water supply, health and social care and veterinary activities. Besides gross value added, a decline was recorded also in the second significant component of GDP formation, i.e. taxes on products, value added tax in particular.
The released data confirm the CNB’s view that the global economic crisis hit the Czech economy with full force in 2009 Q1, sending the level of domestic economic activity significantly downwards. The Czech economy will remain at these low levels for the rest of this year and GDP growth recovery can be expected with the unwinding of the global crisis in early 2010.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the GDP figures for 2009 Q1
The economy declines by more than forecasted by the CNB
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects dropped by 3.4 % both in year-on-year and quarter-on-quarter terms in 2009 Q1.
The above quarter-on-quarter seasonally adjusted decline in real GDP in 2009 Q1 suggests a more pronounced economic downturn compared to the CNB’s forecast, which had assumed a less marked fall in economic activity. The CZSO has at the same time revised the time series for GDP growth in 2005-2008, which shows that a modest annual GDP decrease occurred already in 2008 Q4. In view of this fact, and particularly due to the above mentioned stronger quarter-on-quarter fall in economic activity, the reported annual GDP decline in 2009 Q1 (of 3.4%) was 0.9 percentage point higher than the current CNB forecast (a fall of 2.5%).
As regards the structure of economic growth, real growth in household and government consumption was higher than the CNB had expected. By contrast, gross capital formation recorded a dramatic fall, remaining far behind the CNB’s expectations owing to the evolution of fixed investment and particularly inventories. Similarly, the growth rates of both exports and imports of goods and services fell to much more negative values than expected. However, the deterioration in net exports was somewhat more modest than assumed by the CNB.
Gross value added at constant prices dropped by 3.2% year on year. This was mostly due to the downturn in manufacturing resulting from a sharp decline in external demand. Significant year-on-year declines were recorded also in wholesale and retail trade and repair of motor vehicles, financial intermediation and insurance, and construction. By contrast, value added increased in electricity, gas and water supply, health and social care and veterinary activities. Besides gross value added, a decline was recorded also in the second significant component of GDP formation, i.e. taxes on products, value added tax in particular.
The released data confirm the CNB’s view that the global economic crisis hit the Czech economy with full force in 2009 Q1, sending the level of domestic economic activity significantly downwards. The Czech economy will remain at these low levels for the rest of this year and GDP growth recovery can be expected with the unwinding of the global crisis in early 2010.
Tomáš Holub, Executive Director, Monetary and Statistics Department