The Czech economy experienced a technical recession in the fourth quarter of 2022, with a 0.3 percent quarter-on-quarter decline, according to preliminary estimates from the Czech Statistical Office (CSO). This marked the second consecutive quarterly decline and followed 1.5 percent growth in the third quarter. The overall growth of the economy for the year was 2.5 percent, a slowdown from 3.5 percent in the previous year.

The main factor behind the quarter-on-quarter decline was a decrease in household final consumption expenditure. Gross capital formation and foreign demand helped support year-on-year growth of 0.4 percent in the fourth quarter, while the decline was felt in the trade, transportation, accommodation, and hospitality sectors.

Analysts attribute the decrease in household demand to the effects of high inflation, which has reduced real incomes, and weak consumer confidence. Retail sales also declined towards the end of last year.

Vladimír Kermiet, director of the National Accounts Department at the CSO, commented that the performance of the Czech economy was negatively impacted by lower household final consumption expenditure in the fourth quarter. Despite this setback, the economy remains supported by spending on gross capital formation and foreign demand.

Article by Prague Forum