Business News
Czech producer prices declined for the seventeenth consecutive month in June. Prime Minister pledges to step down if fiscal reform plans fail. Czech firm are believed to stand a good chance to win infrastructure contracts in Iraq. Inflow of foreign direct investment to central and Eastern Europe is expected to slow down.
Producer prices decline in June
Czech producer prices declined for the seventeenth consecutive month in June in year-on-year terms, showing price pressures remain weak. The June producer price index (PPI) fell 0.2 percent month-on-month, and declined 0.9 percent from a year ago, slightly beating analysts' forecast of a 0.8 percent drop. The news is likely to fuel speculation that the central bank might cut interest rates once again after it shaved a quarter of a percentage point off key interest rates in June.
Prime Minister promises to step down if fiscal reform plan fails
Czech Prime Minister Vladimir Spidla said he was confident his financial reform package will pass this month in parliament, where the ruling coalition has a majority of but a single seat. Mr Spidla confirmed though that he would resign if the reform package did not pass. The reform plans call for spending cuts and tax hikes to cut a third off a budget deficit that stands at six percent of Gross Domestic Product.
Czech government seeks business contracts Iraq
Czech foreign minister Cyril Svoboda visited Iraq a few days ago in an attempt to secure a wider role for Czech companies to be involved in rebuilding war-torn Iraq. Mr. Svoboda met with Paul Bremer, administrator for the interim administration. The Czech government supported the U.S.-led coalition in the war and now hopes to be rewarded with reconstruction contracts for its industries, particularly those in the oil sector. Czech companies are considered to be in a good position for contracts because they built more than 60 per cent of Iraq's modern petrochemical works in the 1970's and '80s. In 1990 alone Iraq bought more than 80 million dollars worth of goods and services from Czech companies. The engineering firm Technoexport, a major operator in 1980's Iraq, recently won the Czechs' first post-war rebuilding contract. Since major hostilities ended in May more than 600 Czech firms have expressed interest in contracts to rebuild Iraq. The Czech government's trade promotion agency, CzechTrade, has been coordinating contract talks with Bechtel, the U.S. firm overseeing reconstruction, and the U.S. government.
FDI inflow to slow down - prediction
Foreign direct investment into central Europe will slow down this year but the former Soviet Union and south-east Europe will show substantial increases, according to a study published by the Vienna Institute for International Economic Studies. The Austrian research institute forecasts that investment into the so-called transition countries as a whole would drop by 12 percent to $29.1 billion this year from a record $32.8 billion in 2002 due to fewer privatisations and factory closures. Most of the decline is predicted to take place in central Europe. The institute forecast investments into eight states due to join the European Union next May falling to $15.9 billion this year from $21.5 billion last year. The Czech Republic will top the list with six billion, followed by Poland with four billion. Hungary, Slovakia, Slovenia, Latvia, Lithuania and Estonia are the rest of the group. "In the view of the stagnating European commodity markets there is no need [for foreign companies] to increase manufacturing capacities," the research said. That is why investment focus is switching to utilities and market services, it said.
