The Czech economy experienced a downturn of 0.7% in this year’s third quarter, as the refined estimate from the Czech Statistical Office (CSO) reveals. The preliminary estimate had reported a decrease of 0.6%. The gross domestic product (GDP) was also lower by 0.5% quarter on quarter.
The decline in GDP is attributed to reduced household final consumption expenditure and a decrease in inventories. However, according to statisticians, the final consumption expenditure of government institutions, the creation of gross fixed capital, and foreign demand had a positive impact. “The main factors of the GDP decline in the 3rd quarter were changes in inventory status and foreign demand. The positive contributions were primarily spending on final consumption of government institutions,” commented Vladimír Kermiet, director of the CSO’s national accounts department.
Expenditure on final consumption grew by 0.2% quarter on quarter but fell by 0.4% year on year. Household final consumption expenditure decreased by 0.3% quarter on quarter and 2.3% yearly. “The decline occurred mainly in expenditures for the purchase of medium and short-term consumption items. Government final consumption expenditure increased by 1.2% quarter on quarter and 3.9% year on year,” the CSO stated.
Gross added value (GVA), the result of the difference between goods and services production and production costs, also declined. It decreased by 0.1% year on year and 0.4% quarter on quarter. The Czech economy has been declining for three consecutive quarters, and the rate of decline is deepening, analyst Citfin Tomáš Volf pointed out.
Lastly, the poor performance of the Czech economy reflects the high inflation effect, which continues to destroy the population’s purchasing power and erode their savings. “Consumer spending is now nine percent lower than pre-Covid with no sign of any improvement. Hopes placed in the dissolution of Covid savings were evidently and unsurprisingly not fulfilled – after all, they were very unevenly distributed,” said Petr Dufek, Chief Economist of Creditas Bank.