The third and final CZSO estimate published today confirmed that Czech GDP increased 1.0% qoq in 2Q after a 0.4% decline in 1Q. In year-on-year terms, the economy grew 8.1% (the previous estimate was 8.2% yoy), with a significant effect of a lower base from 2Q20. Economic activity almost reached pre-crisis levels, hitting 95% of the level seen in 4Q19.
The economic rebound in 2Q was supported by the rapid easing of COVID-related measures, which led to a strong increase in household consumption of 6.4% qoq. Continued growth in household disposable income of 8.1% yoy also had a positive effect. Despite its slight decrease from 24.8% in 1Q to 21.6% in 2Q (after seasonal adjustment), the household savings rate remained above pre-crisis levels of around 10%. This could support household consumption in the following quarters.
Fixed investment also strongly recovered in 2Q, with 4.2% qoq growth. Both private and public investment increased roughly 4% qoq. Along with the easing of restrictions, private investment was favoured by an improved economic outlook due to the increased vaccination rate. Moreover, the long-lasting shortage of employees putting pressure on higher automation of production might have had an effect.
Economic growth should continue for the rest of the year, with the risk of problems in industry. The lack of input into production has a strong impact on the automotive industry, which is a significant source of growth in Czech gross value added. Many car manufacturers have reduced or even stopped production. As in 2Q, low exports are likely to be the main barrier to economic growth for the rest of the year. In our latest forecast, we expected Czech GDP to increase 4.2% in 2021, but currently it looks more like growth close to 3%.
Economic and Strategy Research