Czech economy showed its biggest dip in Q1 since the start of 2010

The Czech economy slowed down 2.0% in the first quarter of 2020 compared to the same time in the previous year, according to revised figures from the Czech Statistical Office (ČSÚ).

The time period for Q1 2020 ran from January 1 to March 31, and included the beginning of the state of emergency related to the corinavirus. The state of emergency was declared March 12 and lasted to May 17.

The revised Q1 results were an improvement over the first estimate, which was a 2.2% year-on-year drop in gross domestic product (GDP). Still. the revised estimate confirmed the deepest year-on-year decrease of the Czech economy since the beginning of 2010.

Compared to the previous quarter, the slowdown in Q1 was 3.3% when adjusted for price effects and seasonally adjusted. The negative development in GDP was caused by lower capital formation and by a decrease in external demand, the ČSÚ stated.

Gross value added (GVA) decreased by 2.5%, quarter on quarter. The GVA in manufacturing decreased by 2.9%; in the group of economic activities of trade, transportation, and accommodation and food service activities it decreased by 5.4%. An increase of the GVA occurred in construction, by 0.7%.

In the year-on-year comparison, the GVA decreased by 1.3%. The GVA formation decrease was influenced the most by a 3.4% drop in manufacturing, and a 4.9% drop in the group of economic activities of trade, transportation, and accommodation and food service activities.

On the contrary, a positive contribution to the GVA came mainly from a 2.5% growth in construction as well as a 3.8% growth in information and communication, and 1.5% growth in the group of economic activities of public administration, education, and human health and social work activities.

On the demand side, the year-on-year decrease of GDP in Q1 was influenced by lower capital formation and by external demand. The 2.0 year-on-year drop was negatively influenced bya 1.4 percentage point drop in investment expenditure and by a 0.5 percentage point drop external demand. A positive contribution came from the 1.4 percentage point increase in general government expenditure.

Final consumption expenditure in Q1 increased by 0.2%, quarter on quarter, and by 2.1%, year on year. Of that, consumption expenditure of households decreased by 2.0% in reals terms compared to the last quarter of 2019 and remained unchanged compared to Q1 2019. The consumption of durable and semi-durable goods slackened in particular. Final consumption expenditure by the general government was up 5.2% quarter on quarter, and up 7.1% year on year.

Gross fixed capital formation (GFCF) dropped by 9.7%, quarter on quarter. In the year-on-year comparison it decreased by 5.5%. As for the type of assets, only investments in dwellings strengthened; a significant fall was recorded by investments in machinery and transport equipment.

The international trade balance at current prices decreased by CZK 2.9 billion, year on year, in Q1 2020 to 79.2 billion CZK. Exports of goods and services decreased by 2.6%, quarter on quarter; in the year-on-year comparison, it decreased by 2.4%. The year-on-year decrease of exports was influenced mainly by trade in electronic and optical products, machinery and equipment, and transport equipment.

Imports of goods and services dropped by 3.5%, quarter on quarter; in the year-on-year comparison it decreased by 2.1%. The year on year development of imports was influenced by a decrease in imports of crude oil and natural gas, basic metals, machinery and equipment, and sub-deliveries for the automotive industry.

As for the price development in the Q1 2020, the total GDP deflator reached 3.6%, year on year.

The volume of labor costs increased by 3.9%, year on year, in Q1 2020.

In the Czech Republic, in the Q1 2020, some 5,439,000 persons were employed on average. The total employment remained unchanged, quarter on quarter; in the year on year comparison it decreased by 0.5%. In total, 4.7% fewer hours were worked both in the quarter on quarter and the year on year comparisons.