Recovery or recession? New data on Czechia's economic future released

The gross domestic product for Czechia in the first quarter of 2023 increased by 0.1 percent quarter on quarter. But compared to the same time in 2022, it decreased by 0.2 percent, according to a preliminary estimate by the Czech Statistical Office (ČSÚ). It was its first year-on-year decline since the first quarter of 2021.

“Both the quarter-on-quarter and year-on-year development of the GDP were positively influenced mainly by an increasing external demand. On the other hand, a negative influence came from further decreasing final consumption expenditure of households,” Vladimír Kermiet, director of the ČSÚ’s national accounts department, said.

He added that gross capital formation decreased and there was a year-on-year slump after a two-year period of growth.

The year-on-year growth of gross value added (GVA) was boosted especially by industry, and, in the quarter-on-quarter comparison, also by economic activities in trade, transportation, accommodation, and food service. Construction, information, and communications were also successful. GVA, which measures the value of goods and services produced in an area, indicates how much a particular sector contributes to GDP.

Analysts had been split in their predictions concerning the GDP for the first quarter of 2023. Komerční banka analyst Martin Gürtler was among those that expected nominal growth in the first quarter, signaling an end of the recession.

"We expect a slight increase in household consumption, as indicated by the monthly indicators of sales from retail and services. Pessimistic scenarios regarding the strong negative effects of high energy prices did not materialize, and consumer sentiment, therefore, began to increase at the beginning of this year," he told ČTK before the preliminary figures were announced.

Analysts agree that the Czech Republic can expect an economic recovery later in the year. According to the analysts at bank Česká spořitelna, GDP will increase by 0.2 percent for the whole year, while Komerční banka’s Gürtler predicts a growth of 0.6 percent. For the whole of last year, GDP increased by 2.5 percent.