Economy: Double-dip recession hits Czech economy

With negative growth in the first three quarters of 2012, the economy this year plunged into recession for the second time since the global economic crisis developed. Poor household spending and a lack of public and private investments were the main factors for the country suffering a double-dip recession.

If it was not for the way exports largely held up, at least in the first half of the year, gross domestic product (GDP) would have fallen even more heavily than it did.

Overall, GDP is expected to have declined 1.1 percent by the end of this year, according to an analysis by UniCredit Bank.

A key reason behind the reluctance of households to spend this year was high inflation, while public investments were modest as a result of austerity-linked state budget restrictions.

There are modest reasons for optimism going into 2013, not least the fact that inflationary pressures have reduced - a factor that has already come into play in the fourth quarter of 2012.

Lower inflation is likely to encourage higher spending, with ČSOB, part of the Belgian bank KBC, expecting the drop in household consumption to "ease significantly" next year.

UniCredit also predicts exports will improve in the first half of next year, ultimately leading to predicted growth of 0.7 percent in the local economy next year.

Other research, such as from ČSOB, has predicted 0 percent growth in the Czech economy in 2013, but the bank expects the recovery to gather pace in 2014 with 2 percent growth overall.

Daniel Bardsley can be reached at
business@praguepost.com