Domestic and foreign demand likely to drive Czech economic growth – Erste Group Research

The Czech economic growth rose sharply in the second quarter, coming in at 4.7 percent year-on-year. The positive upward movement was mainly because of household consumption. Household consumption positively contributed 2 percentage points to GDP growth, as compared with the 1.4 percentage points contribution in the first quarter.

This change was mainly driven by extremely tight conditions in the labor market, as the low jobless rate has started pushing wage growth upwards. Besides solid household consumption, investment expenditure and net exports contributed significantly to GDP growth in the second quarter, mainly because of the economic rebound in the euro area, noted Erste Group Research.

Given the high figure in the second quarter, the Czech economic growth is expected to accelerate in 2017 and reach 3.9 percent, stated Erste Group. But such high growth is seen as a temporary development, as GDP growth should arrive at around 3.2 percent in 2018 and 3 percent in 2019. During the remainder of this year and in 2018 and 2019, the economic story of Czech Republic is unlikely to change significantly.

According to Erste Group Research, the Czech economy is expected to be driven by both domestic and foreign demand. The economic rebound in the euro area and tight domestic labor market conditions would be the most vital growth drivers amongst the factors in play.

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