Czech economy grows more than expected in second quarter

Published: 05.09.2022 Related countries:  Czech Republic Czech Republic

Inflation is still among the highest in the EU.

The Czech economy expanded by 0.5% quarter-on-quarter between April and June, faster than earlier estimates, according to updated statistics office data on Tuesday.

With soaring inflation and high interest rates beginning to sap consumer demand around central Europe and businesses facing sagging orders, the region is bracing for a slowdown or even recession in some cases this year. The Czech National Bank has forecast a drop into technical recession in the second half, although a strong first half should lead to overall growth for the whole of 2022.

Rate setters earlier this month left interest rates unchanged for the first time in over a year, while also keeping the door open to a further hike if needed. Second-quarter growth data on Tuesday put the economy on stronger footing heading into difficult times, analysts said, even as some problems were masked in the data.

On a year-on-year basis, gross domestic product increased 3.7%, versus a flash estimate a month ago showing a 3.6% gain.

"Inventories that firms built up in a time of increased uncertainty is behind the year-on-year growth to some extent, which spoils the overall picture," Petr Dufek, chief economist with Banka Creditas, said.

The stronger quarterly figure was above the statistics office's flash estimate of 0.2%. The office said a change in inventories was a main factor behind quarter-on-quarter growth.

Consumption declined on a quarterly basis, reflecting some of the slowdown to come, as households facing soaring energy bills cut back spending.

Central Europe's economies had been on the mend since the worst of the COVID pandemic, but that was interrupted by Russia's invasion of Ukraine, which has shocked energy markets and helped drive already-hot inflation into double-digit rates.

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Source: Reuters