Czech Republic likely to post stronger GDP in Q1 2016

Czech Republic's flash estimates of Q4 GDP, export and import prices for December were released yesterday. The economy's Q4 GDP came in unexpectedly weak, declining seasonally adjusted by 0.1% qoq, against market expectation of 0.4% qoq rise. Export and import prices decreased drastically in December, suggesting sluggish improvements in the economy.  

The economy is drifting closer to negative interest rates or other alternative policies to support inflation. However, whether the economy continues in the same course or not will depend on the ECB and other major European central banks stance in the forthcoming months.

"We view the Q4 disappointment as the result of volatility in capital goods investment, plus one-offs, such as a forced shutdown in the energy sector. Shortfalls such as these tend to be made up for, at least partly, in the following quarter - hence, we would look for a stronger Q1 2016, even while the underlying demand trend may, in fact, cool off. Overall, the economy recorded 4.3% GDP growth last year, and we are comfortable with our sub-consensus 2.2% forecast for this year" Commerzbank said in a research note.