Growth in economic activity comes in slightly below CNB forecast at end of last year
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 1.9% year on year in 2016 Q4. In quarter-on-quarter terms, economic activity increased by 0.4%. Compared to the CNB forecast, the reported economic growth at the end of last year was 0.2 percentage point lower in year-on-year terms and 0.1 percentage point lower in quarter-on-quarter terms. In 2016 as a whole, economic activity was up by 2.3%.
The slight downward deviation of annual GDP growth from the CNB forecast at the end of the year was due to a deeper decline in gross capital formation as a result of a sharper decrease in fixed investment amid a slightly higher increase in inventories. The major negative effect of the decline in government investment due to an only gradual start of the new programme period for EU funds thus probably persisted into 2016 Q4. Government consumption also lagged behind the CNB’s expectations, recording year-on-year stagnation. By contrast, the positive contribution of net exports was larger than forecasted, as total exports rose slightly faster than forecasted while the outlook for goods and services imports broadly materialised. Nevertheless, export growth remained subdued at the close of last year. Continued robust growth in household consumption was in line with the prediction. This component of demand thus remains the strongest and most stable driver of domestic economic growth.
Overall, GDP growth in 2016 Q4 accelerated slightly as expected, although to a somewhat lesser extent than forecasted by the CNB. According to the central bank’s current forecast, the Czech economy will grow by 2.8% this year and the next. The faster expected economic growth compared to 2016 will reflect a renewed increase in fixed investment, within which government investment co-financed from EU funds will recover in particular. Household consumption will continue to rise steadily. The economy will also be supported by an acceleration in export growth. The monetary conditions remain easy and will start to shift towards a neutral stance following the discontinuation of the CNB’s exchange rate commitment.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the GDP figures for 2016 Q4
Growth in economic activity comes in slightly below CNB forecast at end of last year
According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 1.9% year on year in 2016 Q4. In quarter-on-quarter terms, economic activity increased by 0.4%. Compared to the CNB forecast, the reported economic growth at the end of last year was 0.2 percentage point lower in year-on-year terms and 0.1 percentage point lower in quarter-on-quarter terms. In 2016 as a whole, economic activity was up by 2.3%.
The slight downward deviation of annual GDP growth from the CNB forecast at the end of the year was due to a deeper decline in gross capital formation as a result of a sharper decrease in fixed investment amid a slightly higher increase in inventories. The major negative effect of the decline in government investment due to an only gradual start of the new programme period for EU funds thus probably persisted into 2016 Q4. Government consumption also lagged behind the CNB’s expectations, recording year-on-year stagnation. By contrast, the positive contribution of net exports was larger than forecasted, as total exports rose slightly faster than forecasted while the outlook for goods and services imports broadly materialised. Nevertheless, export growth remained subdued at the close of last year. Continued robust growth in household consumption was in line with the prediction. This component of demand thus remains the strongest and most stable driver of domestic economic growth.
Overall, GDP growth in 2016 Q4 accelerated slightly as expected, although to a somewhat lesser extent than forecasted by the CNB. According to the central bank’s current forecast, the Czech economy will grow by 2.8% this year and the next. The faster expected economic growth compared to 2016 will reflect a renewed increase in fixed investment, within which government investment co-financed from EU funds will recover in particular. Household consumption will continue to rise steadily. The economy will also be supported by an acceleration in export growth. The monetary conditions remain easy and will start to shift towards a neutral stance following the discontinuation of the CNB’s exchange rate commitment.
Tomáš Holub, Executive Director, Monetary Department