Bloomberg News

Czech GDP Grows Least in Seven Quarters on Austerity and Crisis

December 09, 2011

Dec. 9 (Bloomberg) -- The Czech economy grew at the slowest pace in seven quarters in July through September as the euro area’s debt crisis damped demand for the country’s exports and government spending cuts curbed household spending.

Gross domestic product rose 1.2 percent from a year ago, compared with a 2.2 percent advance in the second quarter, the Prague-based Czech Statistics Office said in a statement today on its website. The result was worse than the 1.5 percent reported in a preliminary estimate on Nov. 15. GDP contracted 0.1 percent from the previous quarter.

Czech economic growth depends on demand for products including Skoda Auto AS vehicles and other car parts from the European Union. The bloc takes about 80 percent of the country’s exports, with Germany accounting for a third. The government’s effort to cut the budget deficit to less than the EU’s limit of 3 percent of GDP by 2013 is damping domestic demand.

Household spending declined 0.4 percent in the third quarter, from the previous three months, while government consumption decreased 3 percent, the statistics office said. Gross capital formation fell 6.6 percent on the year, mainly due to dwindling inventories.

Czech export growth has slowed this year along with industrial output. Exports rose 11 percent from a year earlier in the third quarter, after 13.8 percent in the previous three months and compared with a 20.3 percent increase in the January- March period. Industrial output growth slowed to 1.6 percent in September, from 16.4 percent in January.

The central bank on Nov. 3 cut the 2011 GDP forecast to 2 percent from 2.1 percent, and reduced the 2012 economic growth outlook to 1.2 percent from the previous forecast of 2.2 percent, citing the effects of the euro area’s sovereign-debt crisis on economies in the common-currency region.

--With assistance from Zoya Shilova in Moscow. Editors: Alan Crosby, Douglas Lytle

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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