Czech Economy Grows Less Than Expected as Exports Remain Weak

The Czech economy expanded less than expected in the third quarter as household consumption continued to recover but exports to key markets, most notably Germany, remained weak.

(Bloomberg) — The Czech economy expanded less than expected in the third quarter as household consumption continued to recover but exports to key markets, most notably Germany, remained weak.

Gross domestic product increased 0.3% from the previous quarter, according to the flash estimate published by the statistics office in Prague on Wednesday. The reading was below the 0.4% median estimate in a Bloomberg survey and trailed the central bank’s forecast of 0.8% growth. The economy rose 1.3% from a year earlier, also a slower pace than analysts and the central bank had predicted.

The quarterly growth was driven by domestic consumption, while foreign demand stagnated, the statistics office said, without providing the breakdown of the figures. It will publish more details on Nov. 29 

As the economy has lagged many European Union peers in the recovery from the pandemic shock and the energy crisis, the central bank slashed borrowing costs by cumulative 275 basis points since December to 4.25%. The board slowed the pace of easing to quarter-point cut at the past two meetings, and market prices indicate bets on another such reduction at the next policy session on Nov. 7.

While inflation is expected to accelerate in the fourth quarter, mainly due to statistical effects, it has stabilized within the central bank’s tolerance range of 1%-3%. Still, Governor Ales Michl has repeatedly pledged to move “very cautiously” with monetary easing to avoid provoking a resurgence in price growth.