Czech Industrial production and construction grew last year, trade balance is in deficit

7 February 2023

Industrial production in the Czech Republic grew by 1.7 percent last year, returning to the level before the covid-19 pandemic. Foreign trade ended in the deepest deficit since the Czech Republic joined the European Union, with the trade balance showing a deficit of CZK 198.1 billion for the year. The data were published Monday by the Czech Statistical Office (ČSÚ). Analysts expect weaker industrial performance this year. The construction sector is expected to remain stable and the trade balance to improve, but remain in deficit.

Industrial production was boosted in particular by car production, which rose by 11.7 percent year-on-year. On the other hand, the production of food products, for example, deteriorated, falling by 1.5 per cent. Wood processing fell by more than eight per cent and the production of metal structures was down by 3.8 per cent. The production and distribution of electricity, gas and heat fell by 3.1 per cent.

Analysts expect the industry to weaken this year, mainly due to weaker demand and continuing problems in supply chains, which are particularly evident in the automotive industry. “Although the automotive sector significantly dragged the industry last year, early this year, domestic automakers will again cut production due to parts shortages. This development shows that the situation in supplier relations has not yet fully normalised and will continue to hamper the domestic industry this year. Despite the general optimism on the markets at the beginning of this year, a number of risks remain and if the industry avoids a downturn this year, it will be a positive result,” said Jakub Seidler, chief economist of the Czech Banking Association.

Construction output maintained its growth last year, rising 1.9 per cent after rising 2.4 per cent in 2021. According to the CSO, construction output grew the fastest in the first quarter last year, rising 9.9 per cent thanks to a low comparative base and favourable weather. In contrast, the construction sector recorded the worst result in the third quarter, when its output fell by 1.7 per cent.

For the whole of last year, the authorities issued 86,047 building permits, down 5.4 per cent year-on-year. The indicative value of permitted constructions fell by 1.6 percent to CZK 512.8 billion compared to 2021. Construction of 41,546 flats started last year, down 7.7 percent year-on-year. Completed flats were 14.1 percent higher, at 39,460, the highest since 2007, according to the ČSÚ.

Higher output of civil and civil engineering construction contributed to the growth of the construction sector last year. However, analysts say the sector faced problems, which were compounded by the effects of the war in Ukraine and the rise in energy prices in the first half of the year, in addition to a tightening supply of more expensive raw materials. Residential construction in the second half of the year was affected by the lower availability of mortgages due to rising interest rates. This year, analysts expect a similar development as last year, and also anticipate increased interest in renovations focused on energy savings and photovoltaics.

The foreign trade deficit increased by CZK 189.2 billion to CZK 198.1 billion, according to the CSO, the trade balance is worse mainly due to expensive oil and gas. According to Otto Daňek, vice-chairman of the Association of Exporters, the strong crown has also complicated the situation for exporters.

Analysts expect the trade balance to improve this year, but to remain negative. According to Jana Steckerová, an analyst at Komerční banka, foreign trade will end this year with a deficit of CZK 110 billion. This will be influenced by fading problems with subcontracting and lower prices of energy raw materials, she said.

Source: ČSÚ and CTK

Example banner for displaying an ad. It can be higher.