Czech Economy Grows 1.6% in the Third Quarter: The Slowest Growth in Two Years
1.6%: The Czech economy grew by this amount in the third quarter compared with the same period last year. The Czech Statistical Office (ČSÚ) reported this in its initial estimate on October 30. In the second quarter, growth stood at 1.8%. This marks the weakest growth since the third quarter of 2024.
Compared to the second quarter, economic output rose by 0.5% after adjusting for price and seasonal variations. The number of employed persons increased by 0.3% from the previous quarter and by 1.5% from the same period last year.
Consumption and foreign demand drive growth
On an annual basis, higher consumer spending, rising gross fixed capital formation, and stronger foreign demand supported the economy. Changes in inventories dampened growth. On a quarter-over-quarter basis, household consumption and the trade balance provided a boost, while gross fixed capital formation acted as a drag.
The picture is mixed when it comes to value added. On an annual basis, manufacturing, trade, transportation, hospitality, and information and communication were among the largest contributors. Compared to the previous quarter, manufacturing and construction contracted slightly. Trade, transportation, hospitality, and information and communication expanded.
The Central Bank Remains on an Anti-Inflation Course
The Czech National Bank (ČNB) raised its key interest rate to 3.75% in June. It was the first increase since 2022. Prior to that, the rate had remained at 3.5% for about a year. Governor Aleš Michl said in an interview with Bloomberg on June 12: “We must continue to combat core inflation.” In May, headline inflation stood at 2.1%, while core inflation was 2.9%.
Shortly before the meeting, Michl had said: “The arguments for a rate hike have grown stronger.” He described the situation as follows: “We are not deciding whether to shift to a tight monetary policy. It is already restrictive.” Trading Economics cites money supply growth, an 8% wage increase in the first quarter, and a growing government deficit as reasons for the hike.
According to Trading Economics, the ČNB left the rate unchanged in August and September. Expensive loans are dampening investment, which slowed in the third quarter compared to the previous quarter. No audited inflation figures are available for the fall, so this text does not cite any.
For German exporters, the Czech Republic remains a market with moderate growth. Domestic demand is driving growth, but industrial output declined compared to the previous quarter. Suppliers of consumer goods are seeing stable demand. Those supplying intermediate goods to Czech factories should expect weaker order volumes. Expensive loans are weighing on Czech buyers, so it’s worth keeping an eye on payment terms and creditworthiness.
Sources: Český statistický úřad (CS/EN), Česká národní banka (EN), Trading Economics (EN), Radio Prague International (EN), Prague Daily News (EN)
SK, Frankfurt