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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