Czech GDP showed some recovery in the third quarter, but will likely decline again in Q4

The Czech gross domestic product (GDP) fell sharply in the third quarter of 2020 compared to the same period last year, but at that same time it showed recovery when compared to the previous three months.

GDP, adjusted for price effects and seasonally adjusted, decreased in July to September 2020 by 5.8% compared to the same three months in 2019, But compared to April–June 2020 it increased by 6.2%, according to preliminary estimates of the Czech Statistical Office (ČSÚ) said.

The large quarter-on-quarter increase, though, was only possible because the second quarter GDP was so low as a comparison point. “In Q2 2020, the Czech economy hit a historical low,” ČSÚ previously stated. Adjusted Q2 2020 GDP fell 10.7% compared to the same time in 2019 and 8.4% compared to the first three months of 2020, according to preliminary estimates.

Referring to results for Q3 2020, the ČSÚ said the negative year-on-year GDP development was caused mainly by a decrease in capital formation and by lower household consumption. “The gross value added (GVA) decreased in majority of economic activities of the national economy. A negative influence on the GVA decrease came mainly from the development in industry and a group of economic activities of trade, transportation, and accommodation and food service activities,” ČSÚ said.

Vladimír Kermiet, director of the ČSÚ’s national accounts department said that the year-on-year development of the economy was mostly affected by a significant decline in domestic demand for both investment and household consumption. “The recovery in foreign demand for Czech goods failed to offset the decline in exports of services,” he added.

Analysts expected an economic recovery in the third quarter due to the lifting of many of the restrictions to combat the coronavirus pandemic. The gains made in the third quarter even exceeded most expectations. They are likely to be wiped out in the last quarter of 2020, however, due to the return of restrictions.

“The domestic economy is likely to decline again in the last quarter of this year and much or all of the recovery from the third quarter will be wasted,” Komerční banka economist Martin Gürtler said, according to news swever iDnes.cz.

Natland Group chief economist Petr Bartona told news server Novinky.cz the year-on-year decline in the third quarter was unevenly distributed among the individual Czech regions. “More than in other quarters, it is affected by tourism revenues. This disappeared in Prague due to the absence of foreigners,” Bartoň said, adding that domestic tourism could help other regions.

The Czech National Bank (ČNB) expects the economy to fall by 8% to 10.1% this year and to grow by 3.2% to 4% next year. The economy is not expected to reach pre-coronavirus levels by the end of next year, according to their estimates.

Employment decreased in the third quarter of 2020 by 1.7%, compared to the corresponding quarter of the previous year, and by 0.1%, compared to the second quarter of 2020.