Czech economy gains strength posting third quarterly rise in Q4 – flash estimate.

By bne IntelliNews February 14, 2014

The Czech economy grew at the fastest rate in more than six years posting a third straight quarterly rise in Q4 2013 confirming expectations that it is on track to recovery after exiting a record-long recession in mid-2013. Flash data by the statistics office showed on Feb 14 the gross domestic product expanding by 1.6% on the quarter in Q4, following a 0.2% hike in the previous three months. The reading was well above the 0.6% rise expected by analysts in a CTK poll and the highest since Q3 2007.

Moreover, on an annual basis the GDP grew by 0.8% in Q4, registering its first increase since Q4 2011 and defying market expectations for a 0.2% y/y drop. In full-2013 the economy shrank by 1.1%, slightly better than expectations for a 1.3% decline.

The annual growth in Q4 was supported by a growth in investments, mainly in transport equipment and machinery, while household and government consumption remained broadly unchanged, the statistics office said. The contribution of external trade to the increase in total demand was only slight with exports growing 4.8%, a bit faster than imports - 4.5%.

On the supply side, activity increased in manufacturing, energy, financial and insurance sectors. On the contrary, construction, agriculture, trade, transport, and most of activities of services have not reached the level of the previous year.

The GDP drop in full-2013 was influenced by weak domestic demand mainly for investments goods and lower foreign trade surplus, the statistics office said.

The gradual recovery of the Czech economy was supported by the central bank’s move into the forex market to weaken the koruna to further ease monetary conditions and ward off deflation threat. The interventions helped boost consumer demand as shoppers rushed to buy goods at the end of the year before prices go up.

The new centre-left government, which came to power on Jan 29 following the October early elections, has said it will pursue looser fiscal policies and boost welfare and infrastructure spending to spur growth.

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