Czech economy grows 2.8 % in Q3

But unemployment still cause for concern

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PUBLISHED 13.12.2010
LAST UPDATED 13.12.2010



Czech economy grows 2.8 % in Q3



In the third quarter of 2010, the Czech economy grew year-on-year by 2.8 percent, which is 0.2 percentage point less than forecast.


Compared to the second quarter, the HDP grew by 1.0 percent, which is 0.1 percentage point less than what was expected one month ago.

The data were released by the Czech Statistical Office.

"The preliminary estimate of the year-to-year development of the GDP published on 12 November 2010 was, above all because of a change in the estimate of indirect tax development, reduced by 0.2 percentage point," the office said.

Without seasonal adjustment, the year-to-year GDP growth in the third quarter was 2.5 percent. 

The Czech GDP has been growing constantly for the last five quarters. After reaching the bottom in the second quarter of 2009, the GDP in the third quarter of this year was higher by 3.3 percent.

The year-to-year increase in the real gross value added (GVA) reached 3.7 percent, above all thanks to the 10.7 growth of the manufacturing industry, which was based mostly on automobile industry and production of electronic and optical equipment.

Household spending grew year-to-year by 1.2 percent while state expenses decreased by 0.5 percent.

Analysts concur that the growth is solid. Helena Horská from Raiffeisenbank said that the bank raises the estimate of the Czech economic growth in 2010 from 1.7 to 2.2 percent. "But for 2011 we expect the economy to slow down to a year-to-year growth of 1.5 percent. The planned budget cuts may reduce the GDP growth by as much as 0.7 or 0.8 percent," said Horská.

On the other hand, Jiří Moser from PwC believes that the economy will accelerate in 2011 on 2.1 percent. "But it will depend on the condition of our western neighbor (Germany), where goes the largest part of Czech firms' export," Moser added.

Unemployment still cause for concern

Although the unemployment rate in the Czech Republic is not so grim as in the USA or Spain, it remains a problem and makes the economic outlook even less certain. In November 2010, the unemployment rate grew by 0.1 percentage point to 8.6, with the number of unemployed increasing to 506,640, breaking yet again the psychological barrier of 0.5 million. 

In addition, the number of vacancies decreased for a third consecutive month in November, by 3.9 percent. Currently, there are as much as 16 job-seekers for one vacancy.

"After two months of 8.5 percent unemployment, the rate is growing again. This is above all because of the loss of seasonal works," said Horská from Raiffeisenbank, adding that everything implies that the labor market situation is still tense.

Libor Stodola from PwC Czech Republic expects that the unemployment rate will surpass 9.0 percent again in 2011. "The return to the pre-crisis unemployment rates will thus be relatively long," Stodola said.

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