The Czech economy has experienced a year-on-year decline of 0.7% in this year’s third quarter, according to revised estimates from the Czech Statistical Office (CSÚ). Preliminary estimates had suggested a decrease of 0.6%. The gross domestic product (GDP) was lower by 0.5% on a quarter-on-quarter basis.
The decline in GDP was primarily due to lower household final consumption expenditures and a decrease in inventories. However, the expenditures on final consumption by government institutions, gross fixed capital formation, and foreign demand had a positive impact. “In the third quarter, the main factors of the quarter-on-quarter GDP decline were changes in inventory levels and foreign demand. The positive contribution was mainly from expenditures on final consumption of government institutions,” commented Vladimír Kermiet, Director of the National Accounts Department at CSÚ.
Expenditures on final consumption increased quarter-on-quarter by 0.2% and fell year-on-year by 0.4%. Household final consumption expenditures decreased quarter-on-quarter by 0.3% and year-on-year by 2.3%.
The decline was mainly in expenditures for medium-term and short-term consumption purchases. Final consumption expenditures of government institutions increased quarter-on-quarter by 1.2% and year-on-year by 3.9%, reported CSÚ.
Gross value added (GVA), the result of the difference between the production of goods and services and the costs of production, also declined. This was by 0.1% year-on-year and by 0.4% quarter-on-quarter. The Czech economy has been declining for three consecutive quarters, with the pace of the decline deepening, warned Citfin analyst Tomáš Volf.
Despite the poor performance of the Czech economy, it is not a surprise and does not fundamentally change the overall economic picture. “We are still struggling with a decline in consumer interest in domestic and especially foreign spending. Without a greater appetite for households and companies to spend, it won’t work. Robust government spending supports the economy on the one hand, but on the other hand, it harms it with growing debt,” added Volf.