The Czech Republic's economy grew by 5.4% in the first quarter, its lowest amount in more than three years as consumer spending slipped, Bloomberg News reports.

The preliminary growth figure compares with 6.6% in the previous three-month period, the Czech Statistical Office said today. The median estimate of 13 economists surveyed by Bloomberg predicted growth of 5.5%. Seasonally adjusted GDP was also 5.4%, while the economy expanded 0.9%, compared with the last quarter of 2007.

The expansion has faltered as household consumption was damped by higher indirect taxes and surging inflation, which has been above Ceska Narodni Banka's ceiling since November. Inflation has been driven by global increases in food and fuel costs and government measures that are beyond the bank's influence.

The decreasing effect of domestic demand on GDP growth, along with an appreciating koruna, has added to the central bank's optimism that the inflation rate will slide back to the mid-point 3% target by next year, from 6.8% in April. A strong koruna, which has gained 6.1%

Consumer prices grew more than 7% in each of the first three months of 2007 and a close to a decade high of 7.5% in February. Rising prices prompted the central bank to raise its benchmark two-week repurchase rate to 3.75% in February, the fifth increase since May 2007.

The inflation rate's jump was also accompanied by a Jan. 1 increase in indirect taxes and state-controlled prices such as rents and energy. The central bank boosted its projection of economic growth to 4.7% for this year from the previously announced 4.1%.