Even so, the decline in the Czech economy in 2Q was historically the deepest. The consequences of the coronavirus pandemic affected almost all components of GDP. The decline in foreign trade contributed about half of the year-on-year decline in the economy. However, household consumption also decreased 7.5% compared with last year, while fixed investment fell 4.8%. Not surprisingly, households have reduced their consumption of consumer durables in particular. The exception was thus only an increase in government consumption of 1.8%, which reflected the expansionary policy of the government trying to compensate introduced restrictive measures. The coronavirus pandemic affected the whole economy as a decline in value added was recorded in almost all sectors.

Compared with our forecast, the development of fixed investment, which increased 0.9% qoq in 2Q, was a positive surprise. Our forecast expected a further deepening of its year-on-year decline. It seems entrepreneurs stopped their investment projects at the beginning of the crisis when it became evident that the impact of the coronavirus on the economy would be unprecedentedly high. On the other hand, household consumption fell faster than we expected, and foreign trade also showed a worse result. Growth in government consumption was also lower than expected, where it is now difficult to estimate how the current fiscal instruments are statistically recorded. Together with the GDP estimate for 2Q, the development in the first quarter was also slightly revised. However, the revision affected only individual expenditure components and overall GDP growth thus remained broadly unchanged. Revisions for 2019 are negligible.

Now the economy is growing again. The recovery is taking place not only in the consumer sector but also in industry and even faster than originally expected. However, we still have a difficult period ahead of us, and that is the approaching autumn. Of course, the further development of the coronavirus will be the most watched. The number of people infected is already increasing, and with the end of summer holidays associated with returning to school and employment, this trend is unlikely to change much. Entrepreneurs are aware of this, especially those in services and trade, who are most afraid of the reclosure of the economy; their confidence in further economic development is thus declining. The problem is that even the slightest decline in confidence, without fulfilling the fears of reclosing the economy, can slow down the ongoing recovery. Therefore, the economy needs a clear plan for the autumn months in relation to what measures will be taken should the situation deteriorate significantly.

We remain optimistic and believe that economic recovery will continue for the next few months. For this year, we expect a decline in the Czech economy of 5% and next year a rise by 6%.