Prague, Czech Republic – The Czech economy experienced a year-on-year contraction of 0.5% in the first quarter, revealing a more significant decline than initially reported by the Czech Statistical Office (CSU) in May, which indicated a 0.4% decrease in the gross domestic product (GDP). The CSU confirmed the quarter-on-quarter stagnation of the economy in the first three months of the year on its website last Friday.

During the first quarter, there was a decline in household incomes and consumption. Vladimir Kermiet, the director of the national accounts department at the CSU, stated, “The total real monetary and non-monetary income of households per capita decreased by 1.2% compared to the previous quarter and by 9.6% year-on-year, which was largely influenced by ongoing price growth.”

Real household consumption per capita also experienced a decline, decreasing by 2.6% quarter-on-quarter and 7.6% year-on-year.

While the household savings rate decreased compared to the previous quarter, it exhibited an increase year-on-year. On the other hand, the investment rate in the household sector declined compared to both the previous quarter and the corresponding period last year.

The non-financial corporate sector, however, observed an increase in profit rates quarter-on-quarter and year-on-year, albeit with a decrease in the investment rate. The profit rate reached 48.6%, rising by 0.2 percentage points from the previous quarter and showing growth from 45.5% in the previous year.

Conversely, the investment rate declined by 1.3 percentage points quarter-on-quarter, reaching 27.2%, compared to 24.7% in the previous year. Non-financial corporate wage costs recorded a year-on-year increase of more than a tenth.

The contraction in the Czech economy in the first quarter, coupled with the decline in household consumption, reflects the ongoing challenges faced by the country’s economic landscape. It remains to be seen how the economy will fare in the coming quarters and what measures will be implemented to stimulate growth and recovery.

Article by Prague Forum