Gross domestic product - 4. quarter of 2004

4th quarter of 2004

According to preliminary estimates constant price GDP increased in Q4 2004 by 4.3% year-on-year. Having been adjusted for seasonal variations and the number of working days, the GDP growth was 1.0% up on Q3 2004.

The development of key demand macroeconomic aggregates was more differentiated than in the corresponding period in 2003. External trade made a substantial contribution to the growth since the year-on-year increase in exports of goods (+23.6%) outstripped the increase in imports (+15.1%) decidedly. The year-on-year growth of gross fixed capital formation and inventories decelerated to 5.0%, being by about twice as big in the previous quarters. Final consumption expenditure resumed their downward trend recorded in the previous quarters to drop below the level of 2003 (-0.6%).

On the supply side, manufacturing and trade maintained their fairly high year-on-year growth rates of gross value added (+8.6% and +4.0%, respectively) while hotels and restaurants and other services recorded a decrease of more than 10%.

Current price GDP increased by 7.8%. The development of producer, export, import and consumer prices in the last months of 2004 was affected by a number of tendencies sometimes acting against each other (of which the most significant included changes in the exchange rate of the Czech koruna to main currencies and the development of prices of goods - especially of oil and metallurgical products - in the world markets). This raised the total price level (GDP deflator) by 3.3%.

Year-on-year development of selected GDP expenditure components (at average prices of 2003):

- Final consumption expenditure by households increased by 1.9%; its growth followed up the development of disposable income and was also stimulated by a fairly high interest of households in consumer loans.
- Government final consumption expenditure was 5.8% down on the previous year, of which current expenditure of centrally governed budgetary organizations dropped in particular.
- Gross fixed capital formation was higher by 7.5%, with investment in buildings growing faster than in machinery.
- As a rule, inventories decreased at the end of year (CZK –26.9 billion), but this time more than in Q4 2003.
- External trade was markedly affected by growing involvement in international cooperation. This was evident from a large rise in both exports and imports of goods, which favourably influenced their balance at current prices. Although the balance remained in red figures, it got better year-on-year by CZK 26.0 billion (from CZK 33.7 billion in 2003 to CZK 7.7 billion in Q4 2004). The current price balance of services got worse by CZK 1.5 billion year-on-year.

Year 2004

In 2004, constant price gross domestic product increased by 4.0% year-on-year (preliminary). As usual, when the estimate for Q4 2004 was made, GDP estimates for all the previous quarters were also updated according to refined and detailed data available: for Q1 from 3.5% to 3.8%, Q2 from 3.9% to 4.0% and Q3 from 3.6% to 4.0%. Current price GDP increased by 7.9% to CZK 2751.1 billion and total price level expressed by GDP deflator increased by 3.7%.

The economic performance in 2004 was influenced by changing conditions for the functioning of the economy tied in to the accession to the EU. Impacts of these changes expanded the involvement in international exchange, which became evident in a sizeable increase in exports and imports of goods.

The year-on-year increase in demand was primarily fuelled by the investment activity of businesses and households, which got reflected in higher gross fixed capital formation (+9.1%). The economic growth in 2004 was stimulated for the first time after several years by positive development of external trade where the faster growth of exports (+20.9%) than of imports (+18.5%) contributed to the improvement of external balance of goods and services. For the distinctly positive year-on-year change in the balance, by CZK 46.3 billion at current prices, turned the formerly negative external trade contribution to the growth of GDP into a positive influence. Total final consumption expenditure only grew by 0.7% year-on-year, its components experiencing differentiated development. While expenditure by households increased by 2.4%, institutions classified to the general government sector spent by 3.2% less than a year ago.

On the supply side of the economy, the development of gross value added in the following volume-significant industries had a decisive role to play in the total economic growth: manufacturing with its total current price share of 27.0%, business services (14.6%), trade (12.0%), transport and communications (10.7%), and construction (6.3%). Of these the following industries did best in real terms: manufacturing (year-on-year growth of gross value added by 7.3%), transport and communications (+3.6%) and trade (+3.1%).

Contact: Jan Heller, phone: (+420) 234 652 175, e-mail: heller@gw.czso.cz

Related publication: 5001-04 Quarterly National Accounts of the Czech Republic, 4th quarter of 2004; (also /ep-5-opendocument)