In a surprising turn of events, the Czech economy has shown signs of recovery, with the Gross Domestic Product (GDP) growing by 1.3% year-on-year in the third quarter of 2024. According to preliminary estimates released by the Czech Statistical Office (CSO), this marks the first time in two years that growth has exceeded the 1% threshold.
The main driver behind this growth has been household consumption, which has been steadily increasing since the beginning of the year. Government spending and foreign demand have also contributed positively to this economic upturn. However, gross capital formation hurt the overall growth.
While these figures may seem encouraging initially, economists warn against premature celebration. Pavel Sobíšek, chief economist at UniCredit Bank, notes that while this is the fourth consecutive quarter of growth for the Czech economy, analysts had expected even stronger performance – about a tenth of a percentage point higher.
The quarter-on-quarter growth tells a slightly different story. The economy grew by just 0.3% compared to the previous quarter, less than the 0.4% growth in the two preceding quarters. This slowdown is mainly attributed to stagnating foreign demand, particularly from Germany, a key trading partner for the Czech Republic.
Petr Dufek, chief economist at Banka Creditas, emphasizes that while the year-on-year numbers look positive, the quarter-on-quarter data is more crucial in the current context. He points out that as a small, export-oriented economy, the Czech Republic has had to rely primarily on domestic consumer and government demand to drive growth this quarter.
Despite these challenges, specific sectors of the economy have shown resilience. The gross value added (GVA) increased, with positive contributions from trade, transportation, accommodation, food services, and financial and insurance activities. Most service sectors also performed well. However, the industrial sector continued to decline, although manufacturing and construction showed positive development in the quarter-on-quarter comparison.
As the Czech economy navigates these complex waters, balancing domestic growth against international economic pressures, it remains to be seen whether this uptick will translate into sustained economic recovery or if it’s merely a reprieve in an otherwise challenging financial landscape.