Czech economy growth slowed to 2.3%, below expectations

Czech economy growth slowed to 2.3%, below expectations
Czech GDP growth fell to 0.4% in 3Q18, down from around 5% in 2017
By bne IntelliNews November 15, 2018

Czech economic growth came off the boil in October as the pan-regional boom in Central and Eastern Europe (CEE) starts to lose momentum. GDP increased by 0.4% quarter-on-quarter in the 3Q18, and by 2.3% y/y in October, according to the preliminary estimate released by the Czech Statistics Office (CSO) on November 14.

In the 2Q18, Czech GDP reported a y/y growth of 2.4%, according to a revised October estimate, of 0.7% q/q. According to the analysts, the 3Q18 growth was expected to amount at 2.5% y/y and at 0.7% q/q.

The Czech economy was growing even faster in 2017, turning in growth rates rising from 3% to 5% over the year, but clearly growth peaked in the third quarter of 2017 and is now noticeably slowing.

“GDP growth has been mostly driven by both the final consumption expenditure of households and of the government institutions,” said head of the CSO Quarterly Estimates Unit Jan Benedikt.

The deceleration of the domestic economy in 2018 is related, according to ING analyst Jakub Seidler, to limited capacities of domestic producers and weaker external demand. “Deceleration of industry is impacted by a growth slowdown in car production the most, it has been stagnant this year," he said.

Despite the figures of domestic economy growth in the 3Q18, performance of the Czech economy remains good and close to its potential. However, it has been hitting its limits particularly due to shortage on labour market. By the end of the year, the experts expect acceleration of economy, at 3% for 2018.

"The result was significantly behind expectations of the Czech National Bank, which assumed that the economy would accelerate to 2.7%. On the other hand, this figure confirms our assumption that the Czech economy has reached a limit of its growth,” said CSOB analyst Petr Dufek.

The preliminary estimate of the CSO does not specify any details of GDP development. The final figures will be provided by the CSO at the end of November.