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Quarterly National Accounts of the Czech Republic

Commentary

Contents

Gross Domestic Product in 4th Quarter of 2002 and Whole 2002



A. Development in the 4th quarter

The 4th quarter of 2002 saw constant price GDP growing 1.5% year-on-year (or 0.3% quarter-on-quarter after seasonal adjustment). The development was fuelled by growing demand for domestic output for final consumption (+2.9%) and capital formation (+1.5%) with net exports acting against the growth (-2.9%).

On the uses side, expenditures on both final consumption and capital formation grew (+4.7% and 5.4%, respectively), with fixed capital formation stagnating and inventories dropping (by CZK 7.4 billion) during the quarter. A significant year-on-year worsening was established for external trade balance, namely in balance of services exclusively, because trade balance remained at the previous year’s level.

The nominal disposable income of the households sector in the fourth quarter of 2002 amounted at current prices to CZK 325.6 billion, growing 3.2 % y-o-y. Disposable income at constant prices grew 4.6 %. Of their current income, households spent 63.1 % on individual consumption and their current expenditures and saving accounted for 32.8 % and 4.1 % respectively. The principle income item – wages paid – grew 5.7 %. In terms of current prices, households spent CZK 7.5 billion more than in the fourth quarter of 2001, y-o-y growth being 2.5 % (3.8 % at constant prices). Gross saving increased CZK 1.9 billion y-o-y up to CZK 19.9 billion. The rate of saving – ratio of gross saving to gross disposable income – increased from 5.72 % in the fourth quarter of 2001 to 6.12 % which presents an increase of 0.4 percentage point y-o-y.

B. Development in 2002

According to preliminary estimates constant price gross domestic product grew 2.0% y-o-y in 2002, and its growth was gradually decelerating during the year (from 2.6% in the first quarter to 1.5% in the fourth quarter). The development of the economy was affected by a number of factors:

  • August floods: while they did not make any principal impact on the output of basic production industries, they heavily affected arrivals of foreign tourists and tourism receipts in consequence;
  • stagnation and weak demand abroad: the stagnation and therefore weak demand in the countries of our principal business partners (Germany in particular) complicating sales of export-oriented producers;
  • appreciation of the koruna exchange rate: not only did it weaken the export ability of the economy, but it created a demanding environment for marketability of domestic products as a result of cheaper imports;
  • considerable fluctuations in prices of imported raw material commodities (primarily crude oil).

The growth of 1995 constant price GDP in 2002 can be estimated to have been brought about by demand for domestic production designed for final consumption (2.6% increase), while demand for domestic sources for capital formation and net exports dropped (0.3% each).

The trend in individual components of the demand, be it for domestic or imported goods, was differentiated:
  • final consumption expenditures grew 4.4%. Their increase in the households sector (+3.8%) fully corresponded with the growth of gross disposable income of this sector. The increase in the government final consumption expenditures resulted from higher non-investment expenditure of budgetary organisations and concerned mainly services in public administration, education and health, where extra costs incidental to the transfer of powers to local governments made their contribution;
  • capital formation grew 1.3% of which fixed capital formation accounted for 0.6%. Investments in machinery and equipment increased (+1.7%), construction investments remained virtually unaffected (+0.2%) and other investments even fell (-6.5%). Investment activities sizeably grew in the households and general government sectors (+9.9% and +6.6%, respectively), the decrease established for financial institutions (-11.8%) was influenced by the high reference basis of the previous year, when the reconstruction of the CNB building was completed. 2002 increase in inventories was CZK 3.8 billion up on 2001;
  • external trade balance of goods and services was CZK 26.2 billion down on 2001. The individual components experienced quite a different development: while there was a CZK 11.3 billion improvement in trade balance and balance of services fell CZK 37.5 billion down. The drop in the latter was reflecting the fall in arrivals of foreign guests last year (amplified in the 3rd quarter by the floods) in addition to decreases in exports and increases in imports of other services.


Gross value added considerably grew in transport and communications (+11.7%) and trade and repairs of manufactured goods (+11.4%). It dropped mainly in hotels and restaurants (-11.7%) and construction (-8.2%).

Current price GDP grew 4.6%, increasing the total price level measured by GDP deflator by 2.6%.

The nominal disposable income of the households sector in 2002 amounted to CZK 1,248.2 billion, growing 3.9% y-o-y. Disposable income at constant prices grew 4.0%. Of their current income, households spent 63.6% on individual consumption and their current expenditures and saving accounted for 32.3% and 4.1% in 2002, respectively. The principle income item – wages paid – grew 6.2%. In terms of current prices, households spent CZK 43.6 billion more than in 2001, y-o-y growth being 3.8% (3.9% at constant prices). Gross saving grew CZK 3.5 billion y-o-y up to CZK 76.1 billion. The rate of saving – ratio of gross saving to disposable income – grew 0,06 percentage points y-o-y (from 6.04% to 6.10%).