Czech gross domestic product grew by 2.7% year-on-year in 2Q19, up by 0.7% quarter-on-quarter, mostly due to growth of domestic demand, according to the refined estimate by the Czech Statistical Office (CSO) published on August 30.

The 2Q19 results were slightly below the Czech National Bank estimate. 

“Though seasonally-adjusted figures seem positive, the GDP structure itself is sending somewhat mixed signals. Household consumption remained solid, growing slightly below 3%. This is weaker than in 2015-2018 where we experienced 3-4% y/y growth but given recent uncertainty and the fall in household confidence, it's not too bad,” said ING Chief Economist Jakub Seidler. 

Household consumption contributed 1.1 percentage points (pp) to the growth and contribution of the general government expenditure added 0.7pp, while gross capital formation had a negative influence of 0.2pp. External demand contributed by 1.1pp.

“Final consumption expenditure increased by 0.8 q/q and by 2.9% y/y. Of that, expenditure of households increased by 0.7% in real terms compared to the 1Q19 and by 2.7% in comparison to the corresponding quarter of the previous year. Final consumption expenditure of the general government was 1.2% up q/q and 3.4% up y/y,” said CSO ́s Director of the National Accounts Department Vladimír Kermiet. 

Investment was below expectations, slowing to 0.9% y/y, while the CNB expected it to grow at 3.7%. “We believe that investment generally represents a downside risk to growth this year, as strong dynamics last year (driven partially by tapping EU funds) will result in a deceleration due to base effects. We saw a similar effect in 2015 vs 2016, though it should be less intense this year,” Seidler stressed. 

He expects the domestic economy to slow down further in 2019, “with the market consensus shifting towards 2.5% growth this year and 2.4% for next year after 3% growth in 2018,” adding that in case of hard Brexit or further escalation of trade wars between the US and China/ EU having a growth figure starting with the number 2 in 2020 would be a favourable result.