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Czech economy jumps in Q1

Staff Writer | June 3, 2017
The Czech economy gained considerable steam in the first quarter of 2017, following a not-so-brilliant Q4.
Czech Republic
Europe   FocusEconomics Consensus Forecast
Growth in Q1 came on the back of robust private consumption and a strongly supportive external sector.

Moreover, the previous quarter’s sharp fall in fixed investment gave way to a strong turnaround on the back of higher EU fund absorption.

GDP growth strengthened from 1.9% year-on-year (yoy) in Q4 to 2.9% in the first quarter of this year. On a quarter-on-quarter base, the economy grew 1.3% in Q1, more than triple Q4’s 0.4% expansion.

The Czech economy continues to be supported by robust private consumption, which contributed 1.0 percentage point to growth in Q1.

The enduring expansion in private consumption—which grew 2.8% in Q1, marginally down from Q4’s 2.9% increase—has been supported by rising wages and a buoyant labor market.

Moreover, investment contracted a milder 0.6% in Q1 after plummeting 6.9% in Q4 due to the lower absorption of aid from the European Structural and Investment Fund.

Moreover, government consumption accelerated considerably in Q1, expanding 2.4% after the 0.2% growth recorded in Q4.

Meanwhile, the external sector added 1.7 percentage points to growth. Imports of goods and services accelerated from a 0.5% increase in Q4 to a 3.9% rise in Q1, reflecting stronger demand for investment goods, particularly car parts.

Export growth jumped from Q4’s 1.8% to 5.4% in the first quarter of this year, benefiting from a firm recovery in the automotive industry.

The economy is forecast to accelerate this year as a tight labor market prompts further wage growth, underpinning household spending, and stronger external demand supports exports.

Nevertheless, a slower-than-expected implementation of EU-financed investment projects could restrain the scope of the expansion.

The Czech National Bank expects the economy to expand 2.9% in 2017 and 2.8% 2018.

FocusEconomics Consensus Forecast panelists expect the economy to expand 2.6% in 2017, which is unchanged from last month’s projection. For 2018, the panel also sees GDP increasing 2.6%.