Czech economy exits record-long recession in Q2 posting stronger than expected growth of 0.7% q/q – flash estimate

By bne IntelliNews August 14, 2013

The Czech economy exited its longest recession on record in the second quarter of 2013 helped by recovering foreign demand while investments and household consumption continued to decline, the statistics office said in a flash estimate on August 14.

The gross domestic product grew by 0.7% on the quarter in Q2, following a 1.3% contraction in the first three months of the year. The economy shrank for six straight quarters till Q1 as the government’s fiscal consolidation measures and the eurozone’s debt crisis eroded spending by businesses and households and curbed demand for exports.

On an annual basis, the GDP contracted by 1.2% in April to June 2013, after a 2.4% slump in the first quarter. Thus in the first half of 2013 the GDP shrank by 1.8% y/y. Analysts polled by CTK news agency forecast a quarterly rise of 0.6% and an annual drop of over 1%. 

The statistics office, which is due to release a detailed GDP breakdown on September 3, said the partial recovery of total demand was supported by positive contribution of external trade with exports of goods rising by 1.4% y/y, while imports edging up by only 0.3% y/y. On the contrary, total investment activity decreased further. Household expenditure was also below last year’s level as indicated by the latest data on retail sales. General government expenditure remained almost unchanged on the year in Q2, the statistics office said.

On the supply side, activity was influenced by weak domestic demand mainly for consumer and investment goods. Thus the value added formation kept on falling in the domestic trade, construction and in industrial branches oriented on investments. The agriculture sector also contracted harmed by unfavourable weather conditions. On the other hand, positive results were reported by financial and insurance activities, the statistics office said.

The ailing economy forced the central bank to cut interest rates close to zero in November 2012 and central bankers are now debating when to launch the first in more a decade currency interventions to weaken the koruna in order to further ease the monetary conditions and bring inflation up to the bank’s 2% target. Weaker local currency will help boost export competitiveness while making imports more expensive, curbing deflation risks.

Measures to revive the economy have been delayed as the centre-right government of Petr Necas collapsed in June amid a bribery and spying scandal. The political standoff deepened further after the cabinet of leftist economist Jiri Rusnok, appointed by the president to replace Necas, resigned earlier this week after losing a vote of confidence in parliament. In a bid to put an end to the political crisis, the lower house of the parliament will vote on August 20 on a motion to dissolve itself, a necessary step towards early elections, likely to be held in October, ahead of a regular vote due next May. 

IntelliNews comment: The Czech economy is suffering from weak domestic demand as the former centre-right government introduced a number of austerity measures, including spending cuts and tax rises, as it was seeking to trim the budget gap to below the EU's ceiling of 3% of GDP. The eurozone’s debt crisis was also curbing demand from abroad but the latest data showed exports are slightly recovering. We expect the Czech economic to continue recovering in the last two quarters of 2012 supported mainly by foreign trade but at best scenario in will report a slight decline in full-2013.

Recent economic forecasts: In early August, the IMF cut its GDP estimate for the Czech Republic and now expects the economy to contract by 0.4% y/y in 2013 versus an earlier forecast for a 0.3% growth. The World Bank is also expecting a 0.4% drop for this year, while the OECD sees a deeper slump of 1%. The Czech central bank and the government are forecasting a GDP drop of 1.5% in 2013.

Related Articles

Czech police arrest Russian accused of US hacking

Czech police announced on October 19 that they have arrested a Russian citizen suspected of involvement in hacking US targets. The arrest was made at a Prague hotel in conjunction with the FBI. A ... more

Czech yields vying for global top spot

The Czech Republic is challenging Switzerland for the world’s lowest yields, as speculative capital pours into local currency debt in anticipation of a boost for the koruna next summer, when the ... more

EPH mine frets as Polish takeover of EDF power plant looms

Polish miner PG Silesia, owned by Czech-based energy holding EPH, could face problems if its bid to buy a power plant from EDF is blocked by the government, local media reported on October 11. ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.