Growth set to regain momentum
The Czech economy lost momentum in 2016, with real GDP growth decelerating to +2.4%, down from +4.5% in 2015. Fixed investment was the main driver of the slowdown, contracting by -3.5%, mainly due to base effects (+9% in 2015) and a much lower level of EU funds absorption. Otherwise, growth was broad-based. Both private and public consumption eased slightly but remained robust, increasing by +2.9% and +1.5%, respectively. Inventories added +0.5pp to overall 2016 growth. External trade activity moderated in 2016, with exports expanding by +4.3% (+7.7% in 2015) and imports by +3.2% (+8.2% in 2015). As a result, net exports added +1.1pp to 2016 growth (+0.1pp in 2015).
In Q1 2017, unadjusted real GDP rose by +3.9% y/y (calendar-adjusted by +1.3% q/q and +2.9% y/y), driven evenly by both domestic and external demand. Fixed investment is on course of a gradual recovery as EU co-financed investment activity should rise under the 2014-2020 programming period. We expect GDP growth to pick up to +3% in 2017, before slightly easing to +2.8% in 2018.