According to the CZSO’s estimate released today, GDP adjusted for price, seasonal and calendar effects rose by 5.2% year on year in 2017 Q4. In quarter-on-quarter terms, economic activity increased by 0.5%. The Czech economy expanded by 4.5% in 2017 as a whole. This is the second best result in the last ten years.

The economic growth recorded in 2017 Q4 was only slightly below the CNB forecast in both year-on-year and quarter-on-quarter terms. This was due to slightly slower-than-expected growth in household consumption. Nevertheless, its dynamics remain robust due to a strong labour market and resulting rapid growth in household income. The deviations of the other demand components from the forecast were generally insignificant and, moreover, offset each other to a large extent.

Overall, the annual growth of the Czech economy accelerated further in 2017 Q4, in line with the CNB’s expectations. According to the CNB’s current forecast, it will slow from last year’s high pace in 2018–2019 but will remain above 3% (3.6% this year). The increase in economic activity will continue to be driven mainly by robust growth in household consumption, reflecting optimism of consumers in an environment of high growth in their income. An increasingly distinct shortage of available labour and continued low interest rates are motivating firms to invest more in machinery and equipment.

This investment is improving labour productivity. Investment growth in the government sector will recover as a result of higher drawdown of EU funds. The economy will also benefit from stable demand growth in the Czech Republic’s main trading partner countries. Nevertheless, the positive contribution of net exports to GDP growth observed last year will disappear this year as a result of an acceleration in import-intensive domestic demand and appreciation of the koruna.

Tomáš Holub, Executive Director, Monetary Department