Czech Economy Likely to Grow 3.5 pct in 2018

The Czech economic growth had decelerated in the second quarter on a sequential basis. Both domestic and foreign demand continues to still drive the economic growth.

The most significant contributors continued to be household consumption, which added 1.6 percentage points because of the solid labor market and fixed investment expenditures, impacted by economic recovery in the Eurozone and a lack of new available employees in the Czech economy, which is compelling companies to invest more into robotization and increased automation of plants.

Meanwhile, the contribution of net exports was a bit negative in the second quarter, as high demand for Czech exports was outweighed by imports for consumption and investment purposes. GDP is expected to come in at 3.5 percent in 2018, according to an Erste Group Research in a report.

“In 2019 and 2020, we expect GDP growth to arrive at 3.0% and 2.9%, respectively. Although the economic development of solid domestic as well as foreign demand should continue, GDP growth will gradually slow down” stated Erste Group Research.

Tighter monetary conditions might be important factors behind this development. Nevertheless, this development is unlikely to be a negative factor.“In fact, the Czech economy has been slightly overheated in 2018, and thus its (expected) development in the coming two years could be understood as a gradual return to the potential growth of the economy. Moreover, high levels of private investment positively affect labor productivity and thus the supply side of the economy”, added Erste Group Research.

Author: red