Czech stats office revises 3Q GDP data showing economy on track to recovery after second straight quarterly rise.

By bne IntelliNews January 9, 2014

The Czech statistics office revised on January 9 third-quarter GDP data showing a 0.2% quarterly expansion versus an earlier estimate for a 0.1% q/q drop. Thus the Czech economy grew for the second straight quarter after in Q2 it posted a revised 0.3% q/q rise. In Q2 the economy exited a record-long recession that lasted for six quarters. The main reasons for the recession were the weak domestic demand caused by three years of austerity measures under the former centre-right government and the eurozone’s slowdown that hurt exports.

On an annual basis, the Czech GDP shrank by 1.2% in Q3, the statistics office said slightly improving the estimate from a 1.3% decline announced in December. The GDP decrease was mainly due to lower investment activity and weak foreign demand, the statistics office said. In Q2 the GDP contracted by 1.7% y/y.

On the demand side, final consumption expenditure edged up by 0.7% y/y in Q3 mainly due to government institutions (up 2.5% y/y), while household consumption stagnated. Total capital formation decreased by 1.2% y/y with fixed capital formation down by 5.3% y/y, whereas inventories grew by over CZK 16bn. Exports edged up 0.3% y/y and imports rose 2.3% y/y in Q3.

On the supply side, the gross value added dropped by 1.1% y/y and 0.4% q/q in Q3 pushed down by a 4.8% y/y fall in construction, a 1.1% y/y decrease in manufacturing, a 2.1% y/y decrease in agriculture and a 4.7% y/y drop in real estate activities. In a positive note, financial and insurance activities grew by 12.1% y/y.

IntelliNews comment: The revised figures showed that the economy did not slip back into contraction as previously thought giving hopes that the country is slowly heading to a recovery. Rising industrial output, gradually recovering consumer confidence and stronger demand from abroad will help the economy rebound in 2014. The government sees the GDP growing by 1.3% in 2014 recovering from an estimated 1% drop in 2013.

Measures to revive the economy have been delayed due to the political standoff that started with the collapse in June of the centre-right government of Petr Necas amid a bribery and spying scandal. Czechs held early general elections in October that produced a highly fragmented parliament. The main centre-left party Social Democrats (CSSD) narrowly won the vote and was forced to form a coalition pact with anti-corruption movement ANO and Christian Democrats (KDU-CSL). The new centre-left government is expected to take power by mid-January.

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