INSTANT VIEW 4-Czech Q1 GDP drops by record 3.4 pct y/y

                                
 PRAGUE, May 15 (Reuters) - The Czech economy fell by a
record 3.4 percent yea-on-year in the first quarter, a worse
contraction than the market had expected, data showed on Friday.
                                
 The market had expected a seasonally-adjusted year-on-year 
fall of 2.4 percent, following fourth quarter growth of 0.7
percent.
                                
 The Czech figure was better than in neighbouring Slovakia,
which posted a 5.4 percent fall from January to March, and
outpaced regional laggard Hungary, which reported a 6.4 percent
contraction.
                                
 Separate data on Friday also showed producer prices fell an
annual 2.5 percent in April, and dropped 0.5 percent from March.
****************************************************************
KEY POINTS:
(pct change)         Q1/09       Q4/08        Fcast Q1
 year/year           -3.4         0.7         -2.4
                                
 
 * Statistical bureau says drop mainly driven by manufacturing
industry.
 * Foreign demand drop behind manufacturing weakness
 * Fixed capital spending drops
 * Household demand broadly unchanged year-on-year
 
COMMENTARY:
                                
 RADOMIR JAC, CHIEF ANALYST, GENERALI PPF ASSET MANAGEMENT
                                
 "The Czech economy contracted much more sharply than what
was expected by the market and by the central bank."
                                
 "Global recession, mainly in key export markets in Europe,
is taking its toll on Czech exports and consequently also on
domestic demand due to the worsening situation in the labour
market and falling investment expenditures."
                                
 "Although this is only preliminary data without any exact
details on structure, it suggests that the full-year GDP
contraction is likely to be in a 3 percent area in the case of
the Czech Republic."
                                
 "Negative news for the Czech crown and, at the same time,
another data piece that keeps the possibility of another
interest rate cut open. Still, a more decisive judgement should
be done only once the final data including structure is released
in early June."
                                
 HELENA HORSKA, ANALYST, RAIFFEISENBANK
                                
 "The slowdown in the Czech economy was unexpectedly fierce.
In the first quarter, it showed the worst results in the last 10
years.
                                
 "The global recession hit the economy to its heart - the
export and investments are falling. The consumption has held up
so far.
                                
 "The scrap subsidy in neibouring countries holds back the
slowdown. But it in the visible future, if there is not at least
some rebound in the global economy, the fall in the Czech
economy can even deepen."
                                
 
                                
 PAVEL SOBISEK, CHIEF ECONOMIST, UNICREDIT, PRAGUE
                                
 "The figure fits with the context of German GDP declining,
and also the fact that industrial output was down more than 20
percent in the first quarter."
                                
 "The figure also probably confirms that the record high
foreign trade surplus in March was not related to any extra
value-added but just an adjustment of inventories."
                                
 "This looks quite pessimistic, but I think this is going to
be the worst figure in the time series. The second quarter will
already see a slightly better figure, at least
quarter-on-quarter."

                                
 JAROMIR SINDEL, CHIEF ECONOMIST, CITIBANK, PRAGUE
                                
 "The GDP figure is a negative surprise given the relatively
mild trade numbers for the first quarter. It implies more
significant drop of investment activity.
                                
 "The drop is deeper than in the central bank forecast, which
saw a 2.4 percent decline. It supports our expectation of
another possible rate cut, either in June or in the third
quarter, depending on the development of the crown."
                                
 
                                
 DAVID MAREK, CHIEF ECONOMIST, PATRIA FINANCE
                                
 "A deeper-than-expected recession along with approaching
deflation confirm that the financial crisis and global recession
has hit the Czech economy significantly and very quickly."
                                
 "This shows there really is room for further support of the
economy by further lowering of rates."
                                
 "The likelihood of (cutting rates) is rising after today's
data."
                                
 "The first quarter should be a bottom of the current
recession, in the next quarter the fall will probably be
smaller."
                                
 "We will be helped by the scrap subsidies abroad and fiscal
and monetary stimuli both at home and abroad."
                                
 
MARKET REACTION:
                                
 The Czech crown <EURCZK=> fell slightly to 26.925 versus the
euro from 26.915 before the data.
                                
 
BACKGROUND:
- For story on analysts' expectations before the data release,
double click on                                   [ID:nLC9960]
- Slovak Q1 GDP                                 [ID:nBSD000189]
- Hungary's Q1 GDP                              [ID:nBUD002954]
- Poland's Q4 GDP                               [ID:nL2411231]
                                
 
LINKS:
- For further details on first quarter GDP and past data,
Reuters 3000 Xtra users can click on the Czech Statistical
Bureau's Website:
                                
 http://www.czso.cz/eng/csu.nsf/kalendar/2004-hdp

- For LIVE Czech economic data releases, click on       <ECONCZ>
- Instant Views on other Czech data                 [CZ/INSTANT]
- Overview of Czech macroeconomic indicators            [CZ/ECI]

- Key data releases in central Europe    [CEE-CONVERGENCE-WATCH]
- For Czech money markets data click on                <CZKVIEW>
- Czech money guide                                      <CZK/1>
- Czech benchmark state bond prices                   <0#CZBMK=>
- Czech forward money market rates                      <CZKFRA>

 (Reporting by Jason Hovet)