Czech economic growth likely to reach around 3.6 pct in 2018

The Czech economy had grown 4.4 percent on a year-on-year basis in the March quarter. Among the GDP components, household consumption and investment expenditures mainly drove the GDP growth. The 4.1 percent rise in household consumption was due to strong labor market and positive sentiment of households.

The 12.2 percent year-on-year growth in investment expenditures was driven by high foreign demand and a lack of available employees, which has been compelling companies to invest more into capital, production automation, etc. For the first time since third quarter of 2015, the contribution of net exports to the economic growth was negative. Even if there was a deceleration in growth of exports, the overall contribution was impacted by high growth of imports associated with sound development of domestic demand.

“In 2018 and 2019, we expect GDP growth to arrive at 3.6 percent and 3.1 percent, respectively”, stated Erste Group Research in a report.

Although the economic story of strong domestic and foreign demand is likely to carry on, the GDP growth is expected to decelerate in comparison with the previous year, mainly because of tighter monetary conditions.

The contribution of household consumption and investment expenditures are expected to stay the most important among GDP components. Meanwhile, net exports’ contribution might stay negative in 2018, but may start contributing positively again in 2019 to GDP growth, consistent with lower domestic demand growth.

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