UPDATE: Czech 1Q GDP Declines At Record Rate, Koruna Weakens

UPDATE: Czech 1Q GDP Declines At Record Rate, Koruna Weakens
  (Adds details, analyst comment, koruna reaction.)     By Sean Carney    Of DOW JONES NEWSWIRES  

PRAGUE (Dow Jones)--Global recession is taking its toll on Czech exports and domestic demand, resulting in Czech gross domestic product contracting by a record 3.4% in the first quarter, more than the market had expected, preliminary data from the Czech Statistics Office, or CSU, showed Friday.

"This is the largest quarterly year-on-year decrease of the economy of the Czech Republic," the CSU said.

"Economic activity decreased due to an unfavorable situation in manufacturing, which for months has been facing a sales crisis predominantly in external markets," the CSU said, adding that fixed capital formation fell significantly during the quarter, while household expenditure remained roughly at the year-earlier level.

Additionally, both exports and imports of goods and services fell nearly 20% in the period, the CSU said.

The first-quarter economic contraction was larger than the average forecast for a contraction of 2.4% on the year in a Dow Jones Newswires poll of eight economists.

"Although this is only preliminary data without any exact detail on structure, it suggests that full-year GDP contraction is likely to be around 3%," said Radomir Jac, chief analyst at Generali PPF Asset Management.

The news is bad for the Czech koruna and the data keep open the possibility of another interest rate cut, Jac said.

Following the data, the koruna weakened against the euro. At 0731 GMT the koruna traded at CZK26.91 to the euro from CZK26.85 before the data were released.

The economy grew 0.7% on the year in the fourth quarter.

The CSU will release its final reading of fourth-quarter economic growth June 9, and warned that this preliminary estimate is based only on partial information from statistical surveys and that the available information was much more limited than before.

"For this reason the standard estimate of GDP and GDP components to be published on June 9, 2009 may markedly differ from the figures just published," the CSU said.

Statistics Office Web site: www.czso.cz

-By Sean Carney, Dow Jones Newswires; +420 222 191 375; [email protected]

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(END) Dow Jones Newswires

May 15, 2009 04:52 ET (08:52 GMT)

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