Czech gross domestic product dropped 0.8% quarter on quarter in Q1 and 0.7%year on year, in large part due a drop in domestic demand, despite rising exports over the quarter, data published by the Czech Statistical Office (ČSÚ) on Friday showed. The office’s flash estimate of May 15 had indicated a 1% drop in GDP.
As for the demand side of GDP, the highest negative contributions were posted by household consumption (-2.3% q/q, contribution -1.1 pp) and fixed investments (-8.6% q/q, contribution -2.2pp). The drop also stemmed from an extraordinary decrease of taxes on products, especially the excise tax on tobacco products and the value-added tax (VAT).
“If we exclude this one-off factor, the GDP data would point to a stagnation of the Czech economy in Q112,” Komerční banka analyst Jiří Škop said. “ The drop in taxes on products was explained by last year's high basis, caused by the stocking up of tobacco products at the end of 2011 (there was an increase in excise tax on tobacco from January 2012).”
The ČSÚ also revised the previous quarters; according to new data, the Czech economy did not enter a recession in Q311 but only in Q411, when GDP declined 0.2% q/q.
“Purely technically, if we assume that much of the decline in Q1 will be recovered during the second quarter (as the drop in Q1 was only temporal and the statistical base will support Q2) then we would expect the Czech economy to decline around 0.5% on average over the full year,” Škop said.