Czech Economy Excels in the End of 2018

Published: 21.02.2019 Related countries:  Canada Canada

Czech economy performed very well in the last quarter of 2018 with higher GDP than expected.

According to estimates, GDP in the Czech Republic grew by 2.9% interannually in the fourth quarter, which is 0.5 percentage points more compared to the growth in the third quarter. GDP grew in the fourth quarter compared to the third quarter value by 1% and reached the highest growth in the last six quarters. The productivity of the economy grew by 3% in 2018. However, productivity growth in 2018, compared to the productivity growth in 2017 at 4.4%, presents a considerable deceleration. This slowdown is caused by shortage of labour and production capacities, and growing uncertainty of the external environment.

A short commentary of the Czech Statistical Office ascribes the growth to the increase in international demand. This demonstrates high performance of Czech exporters, since the external conditions aggravated. The economy of the European Union in the fourth quarter slowed down on average by 1.5% interannually (from 1.8% in the third quarter) with German economy at 0.6% (compared to 1.2% in the third quarter).

According to the Czech Statistical Office, the growth was further aided by domestic demand for investment goods. It is assumed, that in particular real estate investments remained highly dynamic, thanks to co-financing schemes from the European funds. Simultaneously, the growth of private investment was probably stimulated by tension in the production capacities and the effort of the companies to withstand their competition.

At the same time, we expect to see that consumption played a supportive role. Its growth is attributed to the higher employment rate and wages, as well as, consumers’ optimistic expectations. According to the statistics on domestic trade, the revenues of small enterprises adjusted for calendar effects in the fourth quarter grew in real terms by 4.8% interannually, which demonstrates a stable development of consumption.

This year, the Czech economy is expected to continue to grow substantially. Given its capacity limitations and likely effect of the global slow down, it is reasonable to expect further slowdown of the growth to 2.5%. These expectations are supported by both current economic predictions and current surveys among purchasing managers.

CzechTrade Team Calgary

Source: Ministry of Industry and Trade of the Czech Republic, Czech Statistical Office