Business News

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Inflation slows down

The inflation rate continued its sharp rise in July. The Czech Statistics Office announced that the Consumer Price Index grew by 1 percent month-on-month to 5.9 percent in year-on-year terms, which is the highest figure in more than 2 years. The results are in the upper limit of predictions. The main factor behind the increase was the partial lifting of administrative price regulations on gas and rents. Other factors included a 25-percent increase in the price of holiday travel abroad, and the continuing growth of food prices. The so-called net inflation which excludes administrative price regulations and which the Czech National Bank uses for directing its policies stood at 4.7 percent year-on-year.

The high growth of inflation in June made the Czech National Bank increase interest rates two weeks ago. Last week, the Central Bank issued a revised inflation outlook for this and next year in reaction to the unfavourable development in the first two summer months. Originally, the Central Bank expected end-year net inflation to be within the range of 2 to 4 percent, however it now expects levels to be between 3.5 to 4.4 percent. The executive director of the Czech National Bank's monetary department, Ales Capek, told Radio Prague about the outlook for the year 2002.

"Our assumption is that the short-term inflationary pressures which will affect price developments roughly in a one-year horizon will then gradually slow down and inflation will decline slightly. But this decline is accompanied by some uncertainty and there are several risks which might lead to some persistency of inflation on the higher level predicted in the short-term."

Unemployment grows again

The Czech unemployment rate grew at the end of July to 8.5 percent as compared to 8.1 percent in June. The increase is slightly higher than expected and is attributed partly to fresh graduates hitting the labour market. The lowest unemployment remains in Prague, Central Bohemia and some Southern regions - around three percent, while the highest number of jobless people was traditionally reported in North Bohemia and North Moravia, with the absolutely highest unemployment in the district of Most - over 21 percent. On average, there are around seven job applicants for one vacancy, however, in some places it is more than 35.

E.ON and CEZ terminate contracts

The Czech power utility CEZ and its German business partner, E.ON, have terminated all contracts on supplies of electricity. The step was initiated by the German company and stemmed from growing pressure by German anti-nuclear activists and trade partners who called on E.ON to stop buying electricity that may have been produced by the controversial Czech nuclear power station Temelin. E.ON holds large stakes in Czech regional power distribution companies and used to be CEZ's largest customer, accounting for around a quarter of all Czech electricity exports.

Meanwhile, CEZ announced that it recommenced testing at Temelin's first reactor. Block A has been closed for three months to allow essential maintenance work on the reactor turbine. While Austrian politicians have expressed their discontent with the continued test operation of Temelin, the environmental organisation Greenpeace has called on German energy companies to acquire the owner of Temelin - CEZ - in its upcoming privatisation and shut the power station down.

Nemak's investment in Czech republic in jeopardy

Until recently the Mexican car parts producer, Nemak, had been planning to announce a large-scale investment project in the Czech Republic. It had chosen an industrial zone near the West-Bohemian industrial town of Pilsen as the most suitable location for its new European operation. However, the plan has met with fierce opposition from the local environmental lobby. Nemak is now considering another location in the Czech Republic, but has also received invitations from other European countries. Jorge Rada, is the President of Nemak's European Operations.