Czech Republic GDP down 11% year-on-year, largest drop in country's history

The year-on-year drop in GDP was the largest the Czech Republic has seen since the foundation of the country in 1993

Jason Pirodsky

Written by Jason Pirodsky
Published on 01.09.2020 12:05 (updated on 01.09.2020)

The Czech Republic’s GDP tumbled 11% in the second quarter of 2020, the largest drop in the country’s economic output since the foundation of the Czech Republic in 1993, according to new report published by the Czech Statistical Office this morning.

The new findings confirm a preliminary report published at the end of July that forecast a 10.7% drop in Czech GDP.

Largely due to the worldwide COVID-19 pandemic, the drop in Czech GDP was primarily linked to a decline in demand from other countries.

The drop in foreign demand has contributed nearly eight percentage points of the total dip in GDP. Czech exports are down 23.3% year-on-year, while imports were down 18.2%.

“The year-on-year decline in imports was largely due to a decline in imports of oil and natural gas, basic metals, machinery and equipment and supplies for the automotive industry,” the Czech Statistical Office report states.

A dip in Czech household consumption is responsible for two percentage points of the total drop in GDP.

“Households have reduced expenditure mainly on long-term and medium-term durability items, as well as expenditure on services,” the Czech Statistical Office’s Vladimír Kermiet says in the report.

According to analysts, the worst of the economic impacts is likely behind to country. Czech officials have vowed not to implement the kind of broad business closures that were instituted at the beginning of the year in the event of a second wave.

However, negative effects of the GDP downturn, such as a further rise in unemployment, are still forecast to hit the Czech Republic this autumn.

Analysts now predict a 7% total downturn in GDP for 2020, which is a more optimistic outlook than was forecast earlier this summer.

“Today’s revised figures did not differ much from preliminary estimates, so we continue to expect the economy to fall by around 7 percent this year, especially after the end of government support programs,” ING chief economist Jakub Seidler told CTK.

“In the coming quarters, the performance of the economy will gradually improve, or its decline will moderate, but the situation on the labor market will worsen,” says Trinity Bank’s chief economist Lukáš Kovanda.