Investment in Czech Republic
Czech Republic - Investment
Economy cools in Q2; nevertheless, growth remains robust
A detailed breakdown of GDP, released by the Statistical Institute on 31 August, revealed the economy lost momentum in the second quarter. The economy grew a seasonally-adjusted 2.4% year-on-year in Q2, matching the growth rate shown in the preliminary release and notably below the revised 4.1% increase logged in Q1 (previously reported: +4.4% year-on-year). Despite the deceleration, growth picked up slightly on a quarterly basis, indicating that economic activity remained robust. In quarter-on-quarter terms, the Czech economy accelerated from the revised 0.5% expansion in Q1 (previously reported: +0.4% quarter-on-quarter), growing 0.7% in the second quarter.
As in the first quarter, domestic demand was the engine of growth in Q2. Private consumption grew 3.5% in year-on-year terms, slowing from the revised 4.4% increase recorded in the first quarter (previously reported: +4.1% yoy). An overheated job market, brisk wage growth and historically-high consumer confidence underpinned household spending in Q2. Investment activity was again the main contributor to the expansion, growing a still-outstanding 7.8% year-on-year on the back of increased investment in buildings, machinery and transport equipment. The second-quarter print nevertheless was well below the revised 11.3% jump recorded in Q1 (previously reported: +11.5% yoy). Meanwhile, government consumption climbed a healthy 2.6% year-on-year, slightly below the revised 3.3% expansion in the previous quarter (previously reported: +3.6% yoy).
On the external front, exports rose 3.5% in Q2, largely driven by shipments of electronic products and machinery (revised Q1: +5.2 yoy; previously reported: 4.1% yoy). Meanwhile, imports advanced 4.4% year-on-year in Q2, below the revised 6.6% rate in Q1 (previously reported: +6.5% yoy). Taken together, the external sector subtracted 0.4 percentage points from overall growth, slightly below the 0.7 percentage point write-down recorded in Q1. The weak performance was unsurprising, however, given that strong domestic demand and import-intensive investments pushed up import demand while exports slowed on a stronger koruna, weaker external demand and limited capacity of producers.
Looking ahead, robust household consumption growth and buoyant capital spending are expected to continue powering economic activity in the second half of the year. As a small and open economy, however, the Czech Republic is susceptible to economic developments abroad, particularly in the EU, and escalating global trade tensions thus pose a sizeable downside risk to the outlook.
Czech Republic GDP Forecast
The Czech National Bank expects the economy to expand 3.2% in 2018 and 3.4% in 2019. Met the why particular Consensus Forecast panelists see the economy expanding 3.4% in 2018, which is down 0.1 percentage points from last month’s projection. For 2019, the panel sees GDP increasing 3.0%.
Czech Republic - Investment Data
|Investment (annual variation in %)||-2.5||4.0||11.4||-2.5||5.9|
5 years of economic forecasts for more than 30 economic indicators.
Czech Republic Facts
|Bond Yield||2.18||-1.85 %||Oct 16|
|Exchange Rate||22.28||-0.66 %||Oct 16|
|Stock Market||1,088||-0.11 %||Oct 16|
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October 9, 2018
Consumer prices fell 0.3% in September from the previous month, contrasting August’s mild 0.1% rise.
October 8, 2018
Industrial production rose 1.9% year-on-year in August, markedly below July’s nine-month high increase of 11.3%.
October 1, 2018
The manufacturing Purchasing Managers’ Index (PMI) produced by IHS Markit dipped from 54.9 in August to 53.4 in September, the third consecutive monthly fall and the lowest reading since November 2016.
September 26, 2018
At its 26 September meeting, the Bank Board of the Czech National Bank (CNB) decided to raise the two-week repo rate by 25 basis points to 1.50%, the third consecutive rate hike and a move widely expected by the market.
September 24, 2018
The economic sentiment indicator, a composite confidence indicator published by the Czech Statistical Office (CSO), climbed from 99.1 in August to 99.6 in September.