Books on Czech Republic
% of GDP
Update No: 100 - (25/08/05)
The Czech political scene has been unstable for the past two years. In July
2004, Prime Minister Vladimir Spidla resigned from his post following a poor
showing from the Czech Social Democratic Party (CSSD) in the elections to the
European Parliament. Social Democratic interim leader Stanislav Gross took over,
but resigned earlier this year following allegations regarding the origin of
funds borrowed to buy an apartment in Prague six years ago.
CSSD vice-chairman Jiri Paroubek-who served as regional development
minister-formed a new coalition administration on April 25th.
The next election to the Chamber of Representatives is tentatively scheduled for
June 2006. In the June 2002 ballot, the CSSD elected 70 lawmakers to the
200-member Chamber of Representatives.
Paroubek Rating Surges; but ODS still tops the party poll
Many Czech adults are satisfied with Paroubek, according to a poll by STEM. 63
per cent of respondents have a favourable opinion of their prime minister, a 24
per cent increase since May. Support for the governing party increased by 5.9
per cent in July.
Yet the Civic Democratic Party (ODS) remains the top political organization for
Czech voters, according to a poll by STEM. 31.7 per cent of respondents would
support the ODS in the next parliamentary election.
The governing CSSD is second with 20.9 per cent, followed by the Communist Party
of Bohemia and Moravia (KSCM) with 16.6 per cent, and the Christian and
Democratic Union - Czech People's Party (KDU-CSL) with 6.8 per cent.
Communist parliamentarian Pavel Kovacik explained the recent surge in support
for the Social Democrats, saying, "Oscillations in public opinion are part
of a general trend in which the left, taken together, is better off. With the
ascent of the new prime minister, the CSSD has reversed the popularity in its
CNB sees state budget gap below 50bn crowns in 2005
The Czech state budget deficit could be even lower than 50 billion Czech crowns
this year, as at the end of July the budget was still showing a slight surplus,
Czech National Bank (CNB) Vice Governor Ludek Niedermayer said, cited by Prague
Monitor on July 29th.
The deficit for this year has been approved at 83.6 billion crowns and the
finance ministry has already said that the gap could reach some 70 billion
crowns. "We are not sure whether the state would be able to make such a
huge expansion in the rest of the year which would lead to a deficit of, say, 70
billion crowns," Niedermayer said at the press conference.
So far, the government has been able to make do with lower debts than those
which it has approved for itself, he said.
The state budget is still showing a surplus of several billions of crowns. In
the past few years, the state has never accrued debts higher than 55 billion
crowns in the second half of a year. "This would indicate a significantly
smaller deficit," he noted. However, public budgets cannot be forgotten in
these calculations. They include the results of regions, municipalities and
"Certain signals exist that, for example, off-budget funds could show
higher deficits. The overall result is still hard to predict," he said. The
finance ministry has already admitted that public finances may sink into a gap
equal to five percent of GDP. Originally, the government promised the EU not to
have a gap higher than 4.7 percent of GDP. For next year, the government plans a
76.4 billion crowns state budget deficit.
The deficit of public finances in accord with pledges to the EU should stand at
3.8 percent of GDP. The government is cutting its debts partly because it wants
the Euro to be adopted by 2010.
Czech Republic transposes 2,100 EU directives
The Czech Republic has already transposed 2,078 European Union directives
which should have been adopted by June 30th 2005, into Czech law, Interfax News
Agency reported recently, citing data released by the Czech government.
Government spokeswoman Lucie Orgonikova said a total of 25,000 European Union
regulations must be implemented.
Among the most important are directives on the internal market, which are being
closely monitored by the European Commission. Out of the 1,604 EC-monitored
directives, 57 are assessed as fully transposed into the Czech legal order.
The EC also released a report assessing the speed of transposing EU directives
on the joint internal market. The Czech Republic placed 22nd out of 25 EU member
states as of June 1, the spokeswoman was quoted as saying.
However, the Czech trend is positive, as the country has rapidly improved. While
in May 2004 the Czech Republic lacked 30% of the necessary EU directives, with
23.6% of those on the internal market, this year the figures are just 3.8% and
After Malta, the Czech Republic has achieved the fastest improvement of all EU
The CTK news agency reported that the government office is preparing
instructions for its administrative bodies to speed up the harmonisation of
Czech and EU laws.
From borrower to lender status
An event of more than symbolic significance has taken place in the Czech
Republic. It has moved from being a recipient of World Bank finance to being a
contributor to it for other countries, so vibrant has its economy become since
joining the European Union (EU) last year in May.
Czechoslovakia was a founding member of both the World Bank and the IMF, but had
to withdraw in 1954 after the communist take-over in 1948 made life difficult
all round. It rejoined in 1990 after the Velvet Revolution of 1989 and all that.
The statistics since 2003 speak for themselves. GDP at US$120bn is up 4% on 2003
and the average wage is up 3%. The reasons for the buoyancy are undoubtedly
external, with foreigners flocking to the country, the number of tourists up by
19% since 2003 and, vital to the success of the economy, FDI at US$4.9bn is up a
staggering 94% on 2003, bringing the accumulative stock of FDI to around
US$42bn, or US$4,000 per capita, the highest in the former communist world,
although the highest FDI in toto has been into Poland at US$73bn, of course a
much larger country with nearly four times the population.
Prague is a truly marvellous city, with outstanding architecture of every epoch
of European history from the last one thousand years, Romanesque, Gothic,
Renaissance, Baroque, Rococo, Classical and Art Nouveau. It unfortunately also
has some Soviet-style brutalism too, but in the suburbs. Even the communist
bosses knew that they had a jewel of a capital city in Prague and did not want
to spoil it.
One can think of few better places for a visit or for setting up office.
CSA facing full-year loss
Czech Airlines (CSA) is facing a loss worth hundreds of millions of Czech crowns
this year due to competition from low-cost airlines, high oil prices and hefty
investment, Prague Daily Monitor reported.
"CSA will probably end this year in the red," said Deputy Finance
Minister and CSA supervisory board Chairman, Eduard Janota. Last year, CSA made
a profit of 324 million Czech crowns. Three independent sources close to the
management said this year's loss to Czech accounting standards could reach a
HVB Bank net profit rises 24%
The Czech branch of HVB Bank generated a net profit of 862m Czech crowns in the
first half, nearly 24 per cent more than a year ago, spokeswoman Petra Kopecka
said, New Europe reported.
Total assets grew by 10 per cent to 156bn crowns, and HVB Bank has maintained
its ranking of the fourth largest bank on the Czech market by total assets.
After-tax return on equity was 12.6 per cent, up 1.5 percentage points on the
year. The cost-to-revenues ratio improved from 51.1 per cent to 46.3 per cent.
Loans to clients grew by 7.1 per cent while client deposits increased by 4 per
Sofecap buys Komercni pojistovna
Komercni banka (KB) will sell 51 per cent in insurer Komercni pojistovna to
French company Sofecap for 473m Czech crowns, KB CEO Alexis Juan told
journalists, adding that the sale will take place in the third quarter of this
year, Prague Monitor reported on August 1st.
The country's third largest bank also wants to sell by the end of this year 17
per cent in the Essox company which provides leasing and loans. Komercni banka,
which controls 51 per cent in Essox, will sell 17 per cent to the firm
Franfinance which at the moment holds 49 per cent of Essox shares.
CEZ doubles profit to 10.9bn crowns
Power company CEZ netted 10.9bn Czech crowns in the first half, more than double
the year-ago figure, and revenues from the sale of electricity were nine percent
higher on the year at 32.5bn crowns, New Europe reported.
The profit is slightly above economists' expectations. With the bottom line
better than expected the company revised its estimate of full-year profit to
15.2bn crowns from the previous estimate of 13bn crowns.
CEZ said the profit was higher thanks to better operating results as well as the
collection of dividends worth some four billion crowns paid by CEZ's
subsidiaries. Operating profit grew by 60 per cent to 10.9bn crowns.
FOOD & DRINK
Czech brewers' output increases by 3% in H1
Czech breweries raised their first-half production by a preliminary three
percent, chairman of the Czech Association of Breweries and Malt Houses Jan
Vesely said, Prague Monitor reported on July 15. Exports are estimated to have
grown markedly, contributing significantly to the growth in output, he said.
Production was higher year-on-year in all months in the January-June period,
except for February, which was affected negatively by the long lasting effect of
the chilly spell. Full-year beer output is projected to grow to at least 19
million hectolitres, said Vesely. Last year brewers produced 18.75 million
hectolitres of beer, a year-on-year rise of 1.1 percent. Domestic output was
slightly down, while exports were higher by a quarter at 2.64 million
Prague eyes ties with Guatemala
Seeking to strengthen relations with Guatemala the Czech Republic sent an
economic delegation headed by Foreign Minister, Cyrill Svobodato, to the Central
American country recently, New Europe reported.
Svobodato and his counterpart, Jorge Briz, signed an agreement to strengthen
cooperation in trade, economics and to develop and increase tourism. Guatemala
is home to many well known Mayan cultural sites. Guatemala is seeking foreign
investments for the reconstruction of the economy wrecked by a decades long
MINERALS & METALS
Vitkovice Steel profit swells
Czech steelworks Vitkovice Steel made pre-tax profit worth 1.818b Czech crowns
in the first half, up more than five times on the year, spokeswoman Lenka
Hatlapatkova said, New Europe reported.
Sales added more than 45 per cent to eight billion Czech crowns. A year ago, the
company made gross profit of 335m crowns on 5.5b crowns in sales.
Zentiva ups H1 net profit, sales
The largest Czech drug maker Zentiva saw its net profit grow 31.2 per cent on
the year to 988m Czech crowns in the first half, and its sales were 5.6 per cent
higher at 5.188bn crowns, the company said in a statement on August 1, New
Analysts had expected the growth in net profit and sales. Atlantik analyst,
Milan Vanicek, had estimated Zentiva's first half net profit at 1.015bn crowns
and sales at 5.6bn crowns. The improvement would be due also to a growth in
sales abroad, in Poland, Russia, the Baltic countries, and Romania, Vanicek
said. The company also operates in Slovakia.
Cesky Telecom records 23% drop in H1 profit
Top Czech fixed-line operator, Cesky Telecom, recently announced that it made a
2.6 billion Czech crown profit in the first half of 2005, a drop of 23.2 per
cent on the year, Prague Daily Monitor reported.
Consolidated revenues fell by 3.6 per cent to 30 billion crowns. Analysts
predicted Telecom's profits would dip by 10 per cent.
Telecom's lucrative mobile unit Eurotel announced revenues of 14.6 billion
crowns, flat year-on-year. Its gross operating profit fell by seven per cent to
6.7 billion crowns.
Telecom CFO, Juraj Sedivy, said the results reflected a gradual switch from
voice to broadband and data services in the segment of fixed-line technologies.
Other factors are the booming mobile market and competition in both fixed and
In the second quarter, Telecom's performance was affected by one-off costs such
as reserves for potential fines paid to the antitrust office or compensation
paid to a rival, special bonuses and golden handshakes, Sedivy said.
The company will decide on a potential dividend at the end of a planned buyout
of shares. A general meeting this year voted against a dividend due to the
buyout, despite sufficient cash.
Patria analyst Tomas Gatek said Telecom's results were worse than expected.
"In the rest of the year, revenues from fixed lines will continue to drop,
income from mobile networks will stagnate and the share of revenues from data
services will grow," he said. Total revenue from fixed lines dipped by
eight per cent and amounted to 16.1 billion crowns. Revenues from Internet and
data services and from services with value added rose by 26 per cent to 2.2
billion crowns. The number of ADSL connections grew by 62,000 to 163,000 in the
first six months of this year. The group employed 10,470 people at end of June,
down by 12 per cent year-on-year. Cesky Telecom alone cut the workforce by 10
per cent to 7,970 staff in January-June. Spain's Telefonica bought 51 per cent
of Cesky Telecom from the Czech government for 82.6 billion crowns in mid-June.