The Czech economy expanded by 5% year-over-year in 2005, registering the fastest increase since 1995, domestics analysts agreed, CTK reported. Economists attribute the favorable performance mostly to foreign trade, registering its first ever annual surplus amounting to CZK42 billion (€1.4 billion) in 2005. We note that the strong exports performance was achieved even with the slow EU recovery, the high CZK appreciation and the record high oil prices.

Major contributors to this outcome were the car makers Skoda and especially TPCA, but the other industries showed a good shape as well with only several exceptions like the textile industry, hindered by the cheap imports from China, and the steel industry, influenced by the recession on the world markets. At the same time, households' consumption remained moderate, despite the decent growth in incomes, as individuals preferred to invest in dwellings. In Q4 alone, GDP growth accelerated slightly to 5% y/y from the 4.9% y/y increase booked in Q3, the analysts projected, pointing again at the foreign trade as a major factor as imports growth decelerated, mainly of services. The GDP statistics for Q4 and for the full-2005 will be released by the Czech Statistical Office on Thurs., March 9.