Business News

Unemployment rate stagnates at 9.9 percent in November. GDP grows by record 3.4 percent in third quarter driven by household consumption. November marks the end of deflationary development in the Czech Republic. Four bidders interested in two Czech brown coal mines. US Boeing asks government to pay Aero's debts, threatens to exit. Government makes a deal with mobile operators to speed up payments for UMTS licences in return for delay in launch of services. Telecommunications Office calls a public tender for three FWA licences in Prague.

Unemployment below ten percent

According to the latest data provided by the Labour and Social Affairs Ministry, the Czech unemployment rate stagnated at 9.9 percent in November. Economic analysts had predicted the jobless rate to rise to 10 percent. The lowest unemployment rate was traditionally reported in Prague and surrounding regions - around three percent, and the highest number of jobless people remains in the heavy industry and coal-mining regions of North-West Bohemia and North Moravia.

GDP grows by record 3.4 percent in Q3

According to the latest data, Czech economy grew by 3.4 percent in the third quarter. The growth exceeded earlier predictions and was the fastest since the second quarter of 2001. The GDP growth was driven mainly by household consumption and exports.

In the period, Czech households spent over 7 percent more in real terms than a year ago. The spending boom has been fuelled by fast growth in real wages, which was coupled with virtually non-existent inflation for most of the year. Another stimulus were record low interest rates, which have sparked a consumer credit boom. However, the enormous increase in household indebtedness has started causing worries, because inflation is bound to accelerate next year due to a series of tax hikes.

In the third quarter, the Czech economy has surpassed Hungary's, which has been growing at a rate of 2.9 percent. If the acceleration in the Czech Republic continues, some experts believe the country can catch up with Poland and Slovakia, both of whom have reported a 3.8-percent growth. One of the main factors would be the economic revival in Europe that has not translated yet to the Czech export-oriented economy.

Czech inflation up in November

Czech inflation accelerated to its fastest annual rate in nearly a year and a half in November on sharp increases in food prices. The consumer price index grew 0.5 percent month-on-month in November, lifting the year-on-year rate to 1.0 percent. However, a steep rise in inflation is expected to occur in January due to tax changes and adjustments in regulated prices.

Food prices in the Czech Republic jumped 2.2 percent in November, mainly due to a poor harvest which boosted grain prices. The Czech Statistics Office said prices of bread and cereals alone increased by more than 9 percent. Some analysts said producers also took advantage of the withdrawal of 10- and 20-heller coins from circulation to round prices up. Analysts expect a further rise in December when fruit prices traditionally post a seasonal gain.

The Czech National Bank believes the faster growth in food prices was not a "temporary shock" but, in view of the sharp decline in farmers' prices in the past, rather a return to the normal price growth tendency, which implies an end to the deflationary development in the Czech Republic.

It's official: four bids for coalmines

The Czech privatisation agency, the National Property Fund has received three bids for brown coal mining company Severoceske doly and one for Sokolovska uhelna. The state is expected to raise up to seven billion crowns (or around 250 million USD) from the two sell-offs. Tuesday was the deadline for short-listed bidders to submit binding offers in the tender for majority stakes in the two firms. The envelopes will be opened next Tuesday when the government steering committee meets to evaluate the offers. The new owners are expected to be chosen by the end of this year. The government has said it will look first at the bidders' business plans, giving price a lower priority.

Govt turns down Boeing's request for clearing Aero's debts

According to press reports, the US company Boeing has asked the Czech government to pay several billion crowns to cover the debts of aircraft maker Aero Vodochody in which Boeing owns a 35-percent stake. The Czech government rejected the request, saying Boeing has been provided with exclusive conditions at Aero but missed the opportunity. The result is that Aero has no new contracts.

Boeing reportedly demanded that the government pay 8 out of 9 billion of Aero's debts and guarantee new loans, otherwise, the company will lay -off half of its 2,000-member staff. Boeing also warned that they will withdraw from the company, which, before Boeing's arrival, supplied its military and trainer aircraft to dozens of countries around the world.

The government decided that it would not provide any more money to Aero. According the daily Mlada Fronta Dnes, the government has already opened talks with some European aircraft producers on their possible entry to Aero. However, as long as Boeing remains a shareholder, the government cannot sell its majority stake to a rival company and Boeing can block any efforts for Aero's revival.

UMTS licences: pay now, play later

Czech mobile phone users will have to wait for the introduction of the third-generation UMTS network a year longer than originally agreed. The government has made a deal with two Czech mobile phone operators Eurotel and T-Mobile under which they will speed up payments for their UMTS licences in return for a delay in launch of the service.

The IT Ministry said the operators would together pay the government almost 5 billion Czech crowns (or around 170 million USD) in two instalments next year, instead of spreading out the payments until 2011 as had been previously agreed. The telecommunications market regulator in return shifted the deadline for starting the UMTS network services by one year to January 2006, from 2005. The decision is believed to ensure cheaper and better UMTS when it starts as well as a significant revenue for the state budget next year.

New tender opened for three FWA licences in Prague

The Czech Telecommunications Office has called a public tender for three licences for Fixed Wireless Access connections in Prague. The Fixed Wireless Access is used for broad-band services, like high-speed data transmission and Internet access.

The operators will be able to use the networks in the 28 GHz band also for voice services. The main criteria in the tender include for example quality of service, date of launch, prices of Internet connection, and extent of coverage. Successful bidders will pay 3 million crowns, or 100,000 USD for each licence.

In the year 2000, the Telecommunications Office granted similar licences for the use of the 26 GHz band for Fixed Wireless Access. The technology is used mainly for the last mile instead of a metallic local loop. In the vast majority of the 3.6 million fixed lines, the last mile cables are owned by the former monopoly Czech Telecom, which makes access to end users more difficult for independent operators.