According to CZSO, domestic demand is mainly behind the positive quarterly development of the economy. “Household consumer spending and change in inventories had the largest contribution. Vladimir Kermit, Director of National Accounts at the Central-South Regional Office, commented that the record decline in the foreign trade balance negatively contributed to GDP by about six percentage points.”
Final consumer spending grew 3.7 percent quarter-on-quarter and 5.9 percent year-over-year. Household final consumer spending increased 4.3 percent from the previous quarter, and even by 6.4 percent year on year.
In contrast to the first CZSO estimate from the end of October, more accurate estimates of the Czech economy show an improvement. The preliminary estimate showed a 2.8% annualized GDP increase and a 1.4% quarterly increase.
The decline is expected in the last quarter
However, according to analysts, these numbers are not very impressive and the economy is not in a good shape. “Higher employment supports household consumption. This, along with higher government spending, helps our economy grow. However, government expenditures are financed by debt, so this growth is driven by steroids,” BHS chief economist Stuban Kojic compares.
In addition, the situation will be worse in the last quarter. “A multi-week interruption of car production, combined with another wave of the pandemic, is making a deadly mixture of growth for the Czech economy. In a quarterly comparison, we expect a drop in GDP of more than 2 percentage points, which will leave full-year growth at 2.2% Thus, the economy will not eliminate even half of the GDP deficit in 2020 this year,” said Pavel Sobichik, chief economist at Unicredit.
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