Revised estimates from the Czech Statistical Office (CSÚ) indicate that the Czech economy experienced a year-on-year decline of 0.7% in the third quarter of this year. This figure, slightly worse than the preliminary estimate of a 0.6% decrease, is reflective of the economic challenges faced during this period. Additionally, the gross domestic product (GDP) showed a 0.5% decline on a quarter-on-quarter basis.

The key contributors to the decline in GDP were lower household final consumption expenditures and a reduction in inventories. However, positive impacts were observed in expenditures on final consumption by government institutions, gross fixed capital formation, and foreign demand. Vladimír Kermiet, Director of the National Accounts Department at CSÚ, noted that in the third quarter, changes in inventory levels and foreign demand were the primary factors behind the quarter-on-quarter GDP decline, with government institutions’ expenditures on final consumption making a positive contribution.

Expenditures on final consumption increased by 0.2% quarter-on-quarter but decreased by 0.4% year-on-year. Household final consumption expenditures exhibited a quarter-on-quarter decline of 0.3% and a year-on-year decrease of 2.3%, primarily in expenditures for medium-term and short-term consumption purchases. On the other hand, final consumption expenditures of government institutions increased by 1.2% quarter-on-quarter and by 3.9% year-on-year, according to CSÚ.

Gross value added (GVA), representing the difference between the production of goods and services and the costs of production, also declined by 0.1% year-on-year and by 0.4% quarter-on-quarter.

The Czech economy has faced a decline for three consecutive quarters, with the pace of the decline deepening, warned Citfin analyst Tomáš Volf. Despite the challenging economic conditions, the performance of the Czech economy, as reflected in these revised figures, does not fundamentally alter the overall economic landscape. Concerns persist about the need for increased consumer and business spending to drive economic recovery, with government spending providing support but also contributing to growing debt.

Article by Prague Forum