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CZECH REPUBLIC


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 69,590 56,800 51,400 43
         
GNI per capita
 US $ 5,560 5,250 5,310 68
Ranking is given out of 208 nations - (data from the World Bank)

REPUBLICAN REFERENCE

Area (sq.km) 
78,866

Population 
10,249,216 

Density 
(per sq.km) 
132.2

Capital 
Prague 

Currency 
Koruna 

President 
Vaclav Klaus

Private sector 
% of GDP 
80%

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Background:
After World War II, Czechoslovakia fell within the Soviet sphere of influence. In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's leaders to liberalize party rule and create "socialism with a human face." Anti-Soviet demonstrations the following year ushered in a period of harsh repression. With the collapse of Soviet authority in 1989, Czechoslovakia regained its freedom through a peaceful "Velvet Revolution." On 1 January 1993, the country underwent a "velvet divorce" into its two national components, the Czech Republic and Slovakia. Now a member of NATO, the Czech Republic has moved toward integration in world markets, a development that poses both opportunities and risks. 

Update No: 082 - (01/03/04)

The Czech Republic is in an almost perennial political crisis. It is as if, having endured the stasis of communism for half a century, the population wants to show that they have strong, and even volatile, political views all the same, which can lead to recurrent upheavals.
The country is actually doing rather well. But one should not say that out too loud
The Czech government has narrowly survived several votes recently, one of no confidence. The Social Democrats (CSSD), led by Premier Vladimir Spidla, were handed a poisoned chalice in winning elections last year, after their leader, Milos Zeman, had stood down. He may have thought that likely himself, which is why he surrendered power after a decade of prominence in Czech politics.
One thing that is exciting some Czechs is that there could yet be the first US President OF ethnically Czech descent if John Kerry wins the democratic nomination and then the White House. This is still a long shot, still Kerry could be putting down a marker for 2008. 
The last Democratic administration had of course a Czech American in it in the shape of Madelaine Albright, the Secretary of State. These things have probably little real impact. Policy towards the Czech Republic is decided by expert officials in the State Department. Still it would be a source of pride to the Czechs to have a Czech American as president.

The government survives
The Czech Republic has had a difficult time of late. In 2002, the Czech Republic ran a deficit of 7.3% of GDP. This was due partly to the costs of coping with exceptional flooding last summer. The deficit could be as high this year, partly due to the effects of exceptional drought. State spending is over 50% of GDP and the budget deficit is expected to be over 7% again of GDP in 2003. Moreover, the country is suffering from the usual blues of the Central Europeans right now, above all slow growth in the EU, which on last count was reckoned to be quite flat. 
The crisis in the forint, the Hungarian currency, in June did nothing for the Czech crown either. All the Visegrad powers are seen by the markets as having over-extended economies with fiscal problems and an uncertain outlook. Yet, as in the case of the forint, the devaluation of the crown may yet prove a blessing in disguise, enabling industry to raise its exports when the EU economy does at last begin to grow. The latest IMF report in October has been optimistic here.
But with difficulties abounding all around it, Spidla's government is in trouble. It has a bare majority in parliament and now has a hostile president in the old warhorse of the conservatives, Vaclav Klaus. The largest strike in the country since 1989 took place on September 1st, when the teachers staged a one-day strike at inadequate pay. The teachers are the bastion of the natural constituency of the Social Democrats. But to have yielded to their demands would have worsened what is already shaping up to be the record deficit that the economy has ever had. 
It may have suited the opposition parties the Civic Democratic Party (ODS) to lose the no-confidence vote by 100 to 98. With so small a margin between the parties what every MP thinks and does matters. The ODS leaders urged one of their own members, Petr Kott of Liberec, to stand down after being so drunk as to be unable to operate the voting machinery on the day of the vote. Another opposition deputy was absent on health grounds. If these two had voted for the motion, it would have been a dead heat. It was as close as that.
The opposition may well want to let the government steer the unpopular 2004 budget proposals and financial reforms through their early stages in parliament first before taking over. Some reforms are going ahead. The government plans to reduce benefit costs by trimming index-linking. But it has neither the will nor political wherewithal to make a real dent on the problem of excessive state spending. A centre-right successor would be more plausible in the role of retrenchment and reform.

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BONDS

Ceska Sporitelna to issue €45m in bonds

Ceska Sporitelna, owned by Austria's Erste Bank, will issue 10-year bonds worth 1.5bn Czech crowns (€44.6m), the bank said. According to EIN new agency, the bond will be issued at par and will be listed on the Prague Stock Exchange. The bond will have an annual coupon based on the six-month PRIBOR plus 85 basis points, to be paid on a half-year basis. Erste Bank owns 97.9% of Ceska Sporitelna, Czech municipalities hold 1.6% and 0.5% of the capital belong to other investors. The bank has 565.5bn crowns (€16.8bn) worth of assets and almost five and half million clients, reported New Europe recently.

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ENERGY

Seven investors bid for Unipetrol shares

The Czech National Property Fund (FNM) has received seven preliminary bids for the state's 62.99% stake in the petrochemical giant Unipetrol, FNM spokeswoman Petra Krainova said, Interfax News Agency reported recently. 
Krainova did not name the bidders. The spokeswoman said no consortia have yet been formed. PKN Orlen of Poland confirmed its bid. "The offer is part of an early phase of negotiations and the non-binding document confirming Orlen's interest in the privatisation of Unipetrol. It also comprises part of Orlen's strategy according to which Orlen will become a leader in the consolidation of the fuel refining sector in Central European," said the company.

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FOREIGN ECONOMIC RELATIONS

Greek-Czech agro commission on the cards

Agriculture Ministers from Greece and the Czech Republic, George Drys and Jaroslav Palas, respectively, announced an agreement to set up a joint commission of Greek and Czech businessmen that would examine ways to expand trade relations between the two countries, ANA reported. 
This commission will operate under the supervision of the Agriculture Ministry's Secretary General for International Financial Relations, Andreas Korakas, and his Czech counterpart, the ministers said in a joint statement.

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INDUSTRY

Czechs see industrial production boom in November

Industrial production in the Czech Republic expanded in November, boosted by a recovery in foreign orders, especially for cars, Deutsche Presse Agentur (dpa) reported recently, citing a new report from the Czech Statistical Office.
The data in the report showed that, adjusted for the number of working days, the country's industrial output grew by 9.4% in November from the year-earlier month, which had two more working days. The November rate was sharply higher than the 5.2% gain recorded in October.
Unadjusted for the work-day factor, industrial output grew by a preliminary 4.8% in November from a year earlier.
Viewed on a monthly basis, industrial production in November was up 3.1% from the previous month when it gained 2.2% from September. The monthly data is seasonally-adjusted.
The statistics office said higher production of cars, rubber and plastic products drove industrial growth in November. The data on new orders indicated a recovery in new foreign orders compared with October.
Foreign orders picked up 4.1% in November from October, after falling 24.4% that month from September. Foreign orders climbed 9.4% from the November 2002 level, while overall orders in October rose 6.9% year-on-year.
Orders for cars and trailers also recovered after steep falls in October. Foreign orders for these goods climbed 29.8% from October 2003 after plummeting 56.3% in October from September.
On a yearly basis, foreign orders rose 11.5% from November 2002. Overall new orders in this category added 24.4% on the monthly basis and were up 1.6% from November 2002.
Viewed by sector, manufacturing output rose 4.6% from the year-earlier level, while mining output fell 2.2% and energy production (gas, electricity and water) rose 10.2% over the same period.
Over the January-November period, overall industrial production gained 5.6% from the year-earlier level, with mining adding 0.9%, manufacturing rising 5.5% and energy production climbing 9.2%.
The statistics office also said direct export sales of industrial companies grew 0.9% in constant prices from a year earlier, with their share of total sales recovering to 47.1% from 46.8% in October.
Foreign-controlled industrial companies generated 49.0% of the country's total industrial sales, down slightly from 49.1% registered in September. Their direct export sales rose 2.5% and amounted to 71.6% of their total sales, up from 70.9% in October.
The average number of employees in industry fell in November by 3.7% year on year, mostly in manufacturing of leather and wood products.
Average monthly nominal wages rose 6.4% from the year-earlier level to 18,847 Czech crowns (€567.10), and were up 5.5% in the January-November period.
Average hourly wages rose by 11.5%from November 2002 to 137.6 crowns and were up 5.7% for the January-November period.
Labour productivity, measured as sales per employee, was up by 3.9% in October while unit wage costs were up by 2.4% from the previous year's level.

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TELECOMMUNICATIONS

Mobile operator Eurotel sees profit climb 16% in 2003 

Eurotel, the largest Czech mobile operator, posted a net profit of CZK 7.25bn in 2003, up 16% yr/yr by US GAAP standards, the company announced recently. 
The firm said its profit in 2003 was influenced by a tax break related to dividend payments. Without this, Eurotel would have netted some CZK 6.5bn (+ 3% yr/yr). Eurotel paid its first dividend, worth a total of CZK 11bn, last autumn prior to the country's dominant fixed-line operator Cesky Telecom (CT) assuming 100% control, Interfax News Agency reported. 
The firm's operating profit rose 4% yr/yr to CZK 14.2bn. Gross profit -EBITDA - rose to CZK 14.2bn in 2003 from CZK 13.7bn a year ago. 
Eurotel's mobile service revenues rose 3% yr/yr to CZK 27.6bn in 2003. Eurotel clients spent 4.3bn minutes on their phones in 2003, up 3% yr/yr. The volume of short-text messages (SMS) rose 11% yr/yr. 
The growth of Eurotel's revenues slowed from 4% in 1H 2003, but recovered from a 4% yr/yr drop in 2002. Eurotel CEO, Terrence Valeski, attributes this to the introduction of new tariffs and the launch of unlimited mobile access to the internet for a flat fee. 
Sales of the CR's three mobile phone operators at the end of 2003 were also influenced by higher demand for prepaid credits with lower VAT, which can still be used this year. The VAT on telecommunications services increased from 5% to 22% as of January 2004. 
Eurotel registered 4.215m clients at the end of 2003, up by 323,000 yr/yr, and retained its number one position on the market. T-Mobile ranked second, with just under 4m clients, while Cesky Mobil (CM) had 1.55m. 

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