Czech GDP decelerated to 2.3% in 2Q18 as the economy hits its limits

Czech GDP decelerated to 2.3% in 2Q18 as the economy hits its limits
Czech GDP decelerated to 2.3% in 2Q18 as the economy hits its limits / bne IntelliNews
By bne IntelliNews August 15, 2018

Czechia’s economic growth decelerated to 2.3% year-on-year in the second quarter of 2018 from 4.2% growth in the first quarter as the economy runs up against its structural limits, the Czech Statistics Office (CSU) said on August 14. The main reason is a strong base effect from the previous year, but the slow down was also due to depleted capacities of the Czech economy, analysts say.

The main driver of the Czech growth should be domestic consumption, CSU said. In the quarter-on-quarter terms, Czech GDP increased by 0.5%.

Despite the deceleration, Czech growth is still strong. “The Czech economy is still in top swing, as quarter-on-quarter numbers show. More than slowing down, the numbers for the second quarter are a statistical phenomenon,” Raiffeisenbank analyst Jakub Cervenka said.

On the other hand, the Czech economy is starting to reach its structural limits and it has limited extra capacity for more strong expansion in the near future. “Successful companies are working at full blast and they don’t have technologies nor people for any expansion,” CSOB analyst Petr Dufek said.

The main share of the growth in the second quarter were industry, trade and construction sector. Domestic consumption and companies’ investments were the main drivers of the growth.

The second quarter should be the weakest in 2018. “GDP should accelerate in the next quarters. Overall, the Czech economy should decelerate to 3% growth for the full year,” ING chief economist Jakub Seidler said.

Data

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