The second estimate of Czech GDP in 1Q25 showed a substantial upward revision from +0.5% qoq to +0.8% qoq, which was only slightly below our initial forecast of +0.9% qoq. Economic growth therefore continued at a rapid pace, as in 2H24. This was then reflected in the acceleration of annual GDP growth from 1.8% in 4Q24 to 2.2% in 1Q25.

The second estimate of Czech GDP in 1Q25 showed a substantial upward revision from +0.5% qoq to +0.8% qoq, which was only slightly below our initial forecast of +0.9% qoq. Economic growth therefore continued at a rapid pace, as in 2H24. This was then reflected in the acceleration of annual GDP growth from 1.8% in 4Q24 to 2.2% in 1Q25.

The increase in GDP was driven by US frontloading. Ahead of the introduction of tariffs, US manufacturers and consumers pulled forward their purchases of imported goods. This supported European industry, with production recovering significantly in 1Q25. Czech manufacturing output rose by 0.9% qoq in 1Q25, after declining in each quarter of 2024. Consequently, net exports rose markedly, contributing 0.6pp to qoq GDP growth in 1Q25, which was broadly in line with our forecast.

The growth in fixed investment came as a positive surprise, but this was probably mainly due to the public sector. Fixed investment increased by 1.1% qoq in 1Q25, partially offsetting the 2.4% qoq decline in 4Q24. Nevertheless, fixed investment was still 0.6% lower yoy, following a 1.4% decline in 2024 overall. Quarterly growth in fixed investment in 1Q25 was mainly due to other buildings and structures (contributing +1.3pp), which typically includes government investment in infrastructure. Investment in ICT, other machinery and equipment, and weapon systems had a slightly positive impact (+0.3pp), but this may also have been due to government investment, specifically in defence. Household investment in dwellings also rose, likely driven by the strong recovery in the domestic property market. In contrast, business investment likely remained weak, reflecting high uncertainty around US tariffs. Investment in transport equipment declined for the second consecutive quarter, in line with subdued car sales.

Conversely, both household and government consumption were disappointing. Household consumption rose by only 0.1% qoq in 1Q25. This was a significant slowdown from 2H24, when it grew at a rate close to 1% qoq. Although household consumption was 2.5% higher yoy in 1Q25, it remained 2.9% below the pre-pandemic level of 4Q19. The slowdown in qoq growth in household spending may be related to the deterioration in consumer sentiment, which fell back below its long-term average at the start of the year. The high uncertainty associated with tariffs likely played a role. However, subdued household consumption was also due to the previous decline in real wages. Despite renewed growth, real wages remain well below pre-pandemic levels. Government consumption declined by 1.5% qoq in 1Q25 after a rapid growth previously.

Gross value added grew strongly by 1.3% qoq in 1Q25. As a result, the difference between GDP and GVA growth remained significant. GVA growth in 1Q25 was driven by the services and energy sectors, while manufacturing recorded a decline of 0.7% qoq. This contrasted sharply with the increase in industrial production and subdued household consumption.

The structure of GDP in 1Q25 suggests that economic growth may deteriorate rapidly in the coming quarters. This would be due to the fading of the US frontloading effect, pushing industrial production and net exports lower. Uncertainty is likely to remain high, weighing on corporate investments and making households cautious. Consequently, we anticipate that the Czech economy will experience a mild recession in 2H25. However, thanks to the strong start to the year, we expect the economy to grow by 1.5% in 2025 as a whole. The mild recession we expect in 2H25 would affect the figure for 2026, when we forecast economic growth to slow to 1.2%.

Shareholders at today's Annual General Meeting approved a dividend of CZK1,220 per share (this amount is same as last year). Compared to the current market price, the dividend corresponds to a gross yield of 6.6%.

The record date has been set for Monday, June 9, 2025. This means that Thursday, June 5, will be the last day of trading Philip Morris CR shares with the right to this dividend.

Shareholders at today's Annual General Meeting approved a dividend of CZK1,220 per share (this amount is same as last year). Compared to the current market price, the dividend corresponds to a gross yield of 6.6%.

The record date has been set for Monday, June 9, 2025. This means that Thursday, June 5, will be the last day of trading Philip Morris CR shares with the right to this dividend.