Books on Czech Republic
% of GDP
Update No: 098 - (01/07/05)
EU travails affect everyone
The Czechs are as disturbed as the other newcomers to the EU by what has
happened France and Holland. But in a way they can cynically see that it might
all be to their benefit. Enlargement is to slow down. There will be no Turkish
plumber on their doorstep any time soon.
Bohemia, as the country was once called, was the economic powerhouse of the
Austro-Hungarian Empire. It is now proving to be a frontrunner among transition
economies, attracting more FDI per capita than any of them, over US$1,500 to
Czechs meeting Maastrict rules; but reporting slower growth
Nevertheless, it is having teething problems, as countries transforming
themselves from communism to capitalism invariably do.
Although the Czech Republic succeeded in being the only one of the four new
European Union members in Central Europe, the Visegrad four, to meet three of
the four Maastrict criteria for the adoption of the Euro, it has recorded slower
growth, PDM and CTK reported recently, citing information published by the Czech
In its analysis of macroeconomic development, the statistics office said the
other three EU members - Hungary, Poland and Slovakia - grew faster. It noted
however that their inflation was also faster. The Czech economy was the slowest
of the four from 1997 to 2004, and its average growth was also slower than in
In relative terms, GDP from 1997 to 2000 fell compared to the EU25 average. But
the Czech Republic has succeeded in maintaining stable prices, and from 1996 to
March 2005, consumer prices grew by 37.2%, the slowest growth taking place in
the four new Central European EU member countries.
The Czech Republic is meeting the criterion for interest rates and last year cut
the public budget deficit to under 3% of GDP, from 12% the year before,
according to the statistics office. The improvement was the result of a lower
deficit in the state budget and the transfer of 26bn Czech crowns to the reserve
Czech exports are growing and terms of trade improving. While import prices grew
by 1.1% annually from 1993 to 2004, export prices went up by 2.5%. Czech exports
accounted for 1.5% of world trade in 2002.
Booming car industry
A key sector here is the car industry. It is becoming one of the world's leaders
in terms of per capita car output, as is Slovakia, its former co-eval in
Czechoslovakia. In 2005 800,000 cars were turned out, double the number for
2004. It is no coincidence that virtually all the extra 400,000 were sold to
other EU states. EU membership does help.
The industry employs 90,000 people and 40,000 are employed in ancillary
sub-contracting activities. The Czech Republic, along with its neighbour, looks
like becoming the Detroit of Europe.
New auto centre emerges
AFL Automotive Business opened a new development centre in Plzen in Czech
Republic recently. The new centre is set up for the design and development of
automotive electric and electronic distribution systems for Skoda and other
European OEMs. AFL Automotive will attract new customer in the emerging central
and eastern European automotive markets. AFL Automotive is supplying electrical
distribution systems, subassemblies and components to automotive customers
including Skoda, Volkswagen, Daimler Chrysler and others from its facility in
Stribo, Czech Republic. Thirty technical people will be employed at the new
Komercni Banka profit falls
Komercni Banka (KB) generated a profit of 1.9bn Czech crowns in the first
quarter of 2005, CTK News Agency reported recently.
But Komercni Banka spokeswoman, Marie Petrovova, said that as compared to the
previous year there is a 70m crowns fall in profit. Overall revenue surged 5% to
5.6bn crowns. Net interest income increased 15% to 3.2bn crowns. Petrovova said
"The improvement was seen in loans, more money on current accounts, and
higher net interest income from investment banking." Fees and commissions
totalled 2.1bn crowns up by 1.1%. Interest in loans continued to grow in the
first quarter. The volume of mortgage loans increased 39% to 33.2bn crowns,
consumer loans were up by 17% at 10.7bn crowns, loans to small- and mid-sized
companies were 23% higher at 47.6bn crowns, and loans to large companies grew 8%
to 71bn crowns.
PKN Orlen buys Unipetrol
Poland's top energy concern PKN Orlen recently closed a 13bn Czech crown
(US$565m) deal to buy the Czech Republic's petrochemical works, Unipetrol, the
Czech government's National Property Fund (FNM) announced. PKN paid the
government the 11.3bn crowns owed in the months since the Polish company paid a
deposit after winning rights to the government's 62% stake in Unipetrol last
year, FNM spokeswoman, Petra Krainova, said, New Europe reported.
The deal is the second major privatisation of the year for the Czech government,
which sold its telecommunications company, Cesky Telecom to Spain's Telefonica
for 83bn crowns in April. The Unipetrol sale was supposed to be completed last
autumn, but PKN's plans were delayed by a Polish government corruption scandal
and a review by European Commission regulators.
Telecom boosts net profit in Q1
Cesky Telecom (CT), the Czech fixed-line monopolist recently sold to Spain's
Telefonica, netted a consolidated 1.6bn crowns in the first quarter of 2005, up
12.1% year-on-year, according to international financial reporting standards (IFRS),
Interfax News Agency reported.
CT's revenues fell 2.2% year-on-year to 14.7bn crowns in the monitored period,
while costs rose 3.5% year-on-year to 7.7bn crowns. The firm's gross profit (EBIT)
fell 3.2% year-on-year to 2.3bn crowns in the first quarter. The results include
those of Eurotel, CT's 100% owned mobile subsidiary. CT raised its stake in
Eurotel from 51% to 100% at the end of 2003. CT's fixed line revenues fell 6%
year-on-year to eight billion crowns in the first quarter of 2005. "This is
in line with the trends in preceding periods, driven mainly by a decline in
revenues from traditional voice services which have not been fully compensated
by the increase in revenues from internet, data and value added services,"
said CT. CT's consolidated debt reached 22.2bn crowns at the end of March 2005,
down 47% year-on-year. The decline is mainly due to the repayment of a
syndicated loan used for the Eurotel acquisition.
Cesky Telecom ready to slash wholesale prices via ADSL
Cesky Telecom (CT), the country's biggest telecoms company, will cut its
wholesale prices for high-speed internet connection via ADSL as of June, CT
spokesman Vlastimil Srsen said recently, Interfax News Agency reported.
CT will slash wholesale prices by 29-48%, with prices for the highest speed ADSL
connection falling most. CT will also introduce two new ADSL wholesale tariffs.
The slowest, cheapest option (128/64 kb/s) will be available for CZK 304 per
month while the fastest variant 2048/256kb/s) will cost CZK 1,185 a month. CT
also plans to cut its ADSL prices for end-users as of June. Current end-user
prices start at some CZK 600 a month.
Last year the price of a high-speed ADSL internet connection in the Czech
republic fell by one third. CT registers over 127,000 ADSL clients and claims
market share of approximately 80%. Tiscali, Aliatel and Czech On Lline, which
all lease CT's fixed lines, are the monopolist's biggest rivals on the ADSL
market. A full 80% of Czechs should have access to a high-speed internet
connection by 2006, according to a government plan. Dial-up is currently the
predominant method of internet connection, used by over 50% of Czechs.
Czechs, Chinese target JV
China's state-run ZTE company is offering to supply 3G mobile phone equipment to
all three Czech mobile companies, Prague's Euro magazine reported recently.
The magazine quoted a ZTE official as saying that the company has partnered with
the Czech firm, TTC, in hopes of breaking into the fast-growing Czech market.
ZTE Czech Director, Yang Ming, also hinted at expanding in Europe from a Czech
base, telling Euro that the Central European country "is geographically
interesting for us." Talks with Deutsche Telecom's Czech subsidiary,
T-mobile, were held recently and negotiations with Telefonica's, Eurotel, were
scheduled to take place in the near future.
No timetable was given for ZTE's talks with Oskar, which is being bought by
Vodafone. Each Czech mobile company posted revenue and client growth in the
first quarter. The three firms reported for the period total revenues of 17.1bn
Czech crowns (US$702m).