According to preliminary data from the Czech Statistical Office (ČSÚ), the Czech economy grew by 0.4 per cent year-on-year in the second quarter of this year, primarily driven by household consumption. The gross domestic product (GDP) increased by 0.3 per cent every quarter. This growth is a positive sign amid challenging global economic conditions.
Vladimír Kermiet, head of the National Accounts Department at ČSÚ, noted that year-on-year economic growth was mainly supported by household final consumption expenditures. Government final consumption expenditures also increased, and foreign demand had a positive impact. However, changes in inventory levels had a negative effect. The data highlights the significant role of domestic spending in driving economic growth.
Domestic demand, particularly higher consumption expenditures, similarly influenced quarterly GDP growth. In contrast, foreign demand had a negative impact. The data suggests that while domestic consumption remains robust, external factors challenge sustained economic growth.
The development of gross value added (GVA), which represents the difference between the production of goods and services and the production costs, was mainly supported by sectors such as trade, transportation, accommodation, and hospitality. Information and communication activities, banking, and insurance also performed well. However, the industrial sector continued to experience a decline, raising concerns about its future competitiveness.
Petr Dufek, chief economist at Creditas Bank, pointed out that the main issue facing the Czech economy is insufficient foreign demand, which is reflected in the weak performance of the domestic industrial sector. This suggests that the industrial sector is struggling to maintain its competitive edge due to high energy costs and regulatory pressures.
The decline in the industrial sector raises the question of whether it is merely a cyclical downturn or an indication of a more permanent loss of competitiveness. The future trajectory of the Czech economy will depend on how it navigates these challenges and whether it can boost foreign demand to support its industrial base.
In summary, while the Czech economy grew in the second quarter, underlying challenges must be addressed. While the strong performance of household consumption and certain service sectors is encouraging, the industrial sector’s decline and weak foreign demand pose significant risks to long-term economic stability.