The Czech economy experienced a 0.6% year-on-year decline in the second quarter of 2023 due to lower household consumption, according to a preliminary estimate by the Czech Statistical Office (CSU). However, the gross domestic product (GDP) increased by 0.1% between quarters. Despite the increase, the economy has declined for two consecutive quarters.
Vladimír Kermiet, director of national accounts at the CSU, stated that “lower final household consumption expenditures and lower gross capital formation negatively influenced the year-on-year GDP development. Foreign demand had a positive effect again.” He also noted that production only increased year-on-year in the industry sector, mainly due to higher car production. However, this is not enough to protect the Czech economy from decline, primarily caused by the decline in more significant service sectors that react to weak private consumption and stagnant investment activity.
The decline in real incomes due to high inflation continues to affect household consumption. Still, consumption has stabilized and is stagnating from a quarter-to-quarter perspective. Despite this, the high-interest rates associated with economic uncertainty lead to a decrease in investment activity by companies, according to Jakub Seidler, the chief economist of the Czech Banking Association.
The economy’s decline has been ongoing for several quarters and is now on the brink of recession and stagnation. This decline is mainly due to the decline in significant service sectors and weak private consumption, and stagnant investment activity.
The Czech economy’s situation shows the importance of understanding and addressing user needs. By understanding the needs of consumers and businesses, companies can adjust their products and services to meet those needs, leading to higher demand and economic growth.