Government investment slumped in the first half of the year
5.10.2016Company: Amcham
The Czech Statistical Office confirmed today that GDP grew 0.9% qoq in the second quarter. In a yoy comparison, the Czech economy thus increased its economic performance 2.6%. Nothing has changed regarding the fact that the main growth contribution was provided by the external trade balance, which printed a historically high surplus. In contrast, domestic consumption disappointed when it decelerated qoq growth to only 0.1%. It corresponds to the relatively high savings rate in the second quarter.
Investment dropped even more than we expected when it slumped 4.1% qoq. However, today’s figures show that the drop of investment activity is solely due to the government sector as its investment sharply declined in the first quarter and continued decreasing in the second. This is most visible in the construction sector, which has experienced a severe crisis. In contrast, non-financial corporations are not afraid to invest as their investment remains stable. Also, the gross profit margins grow. Non-financial corporations thus enjoy good times.
We expect household consumption will accelerate again in the second half of the year, and it will take back its position of the main growth driver. Investment activity is likely to pick up continuously as well, as the government is set to start working on new infrastructure again. However, growth will be sluggish, and the high statistical base from last year will continue dragging the yoy advances. GDP growth for the whole of 2016 is set to print at 2.5%. Next year, it should accelerate to 2.7%.
Tags: Economics | Finance |
