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Czech economy remains stuck in recession

Economic recession deepened in the first quarter of 2013. Gross domestic product fell by a hefty 0.8 per cent in the first quarter of 2013, marking the fifth straight quarter of contraction. It is the longest economic recession in the history of the Czech Republic.

Czech economy has been enduring weak domestic demand as government focused on narrowing budget deficit. Foreign demand has diminished due to Europe’s debt crisis which curbed Czech exports such as cars and car parts. After 3 years of growth, Czech exports decreased 4.4 percent in the first quarter of 2013 and net exports ceased to be a source of GDP growth.

It is generally expected the economy will remain in recession in 2013. Private consumption is set to remain the main drag on growth.Retail sales declined in 5 consecutive months through March.    

The Czech government cut investment and raised some taxes (value added tax) to curb the budget shortfall in the past 3 years.