Czechia’s gross domestic product grew by 2% year on year and by 0.5% quarter on quarter in the first quarter of this year (chart), according to the preliminary estimate released by the Czech Statistical Office (CZSO).

“The y/y growth of the economy was solely supported by the domestic demand, especially by final consumption expenditure of households,” commented the director of the National Accounts Department at CZSO.

The y/y development is also up on the refined 1.8% growth in the last quarter of 2024, which was also carried by the revived household consumption.

The expenditure of gross capital formation also slightly contributed to the Q1 growth, CZSO also noted, as did external demand, which in recent months was subdued, including Czechia’s key export market, Germany. Employment increased by 0.9% y/y and by 0.5% q/q in Q1.

The figure comes as the local market analysts expect a worsening of external conditions for the export-oriented Czech economy amid international uncertainties following the Donald Trump administration's introduction of US tariffs on imported goods.

The head economist at Investika consultancy, Vít Hradil, told Czech Television (CT) that “the immediate impact of this move can be expected through cooling down of industrial demand from Germany, for which the American market is important, as well as through lowering of investment activity.”

PWC’s Dominik Kohut pointed out for CT that some of the external pressure could be mitigated by the Czech National Bank (CNB) “if the CNB bank board decided to continue lowering interest rates to 3.5% next week.”

As bne IntelliNews covered, Czech central bankers paused the policy of lowering interest rates after they kept the key interest rate unchanged at 3.75%. The rate is the lowest since January 2022.