Inflation accelerates beyond expectations to its fastest rate in nearly two years. The unemployment rate rises to a record 10.8 percent but many are reluctant to take available jobs. Labour and Social Affairs Minister is planning to tighten the conditions for foreigners who want to obtain a business licence. Czech construction firms are merging so as to have easier access to large contracts financed from European Union funds.
Inflation accelerates beyond expectations
Czech inflation accelerated beyond expectations to its fastest rate in nearly two years in January. Analysts said the price figures signalled that a period of low inflation had ended and that interest rates would start rising sooner or later. The Czech Statistics Office said that prices grew 1.8 percent month-on-month, putting the annual inflation rate at 2.3 percent, as a result of tax changes and further deregulation of public utility charges.
According to some analysts, the inflation rate has finally returned to a normal level after more than a year and a half. According to analyst Pavel Sobisek from the HVB bank, it is just a question of a few months before the inflation rate breaks through the three percent level.
The Czech Republic experienced a gradual fall in inflation to minus 0.4 percent in year-on-year terms for the first quarter last year, but the trend then slowly changed.
The Statistics Office said that half of the inflation rise was due to market factors, while 0.5 percentage points were due to changes in the collection of value added tax and 0.4 percentage points were due to price deregulation.
Czech National Bank Governor Zdenek Tuma said that further VAT changes agreed by the coalition government last week would boost inflation to about 3.5-4.0 percent at the end of this year.
Unemployment reaches record high
All of the 77 employment offices in the country reported a month-on-month increase in unemployment in January. The highest rate - 24.4 percent - was as usual reported in the North Bohemian district of Most. The jobless rate reached or exceeded 20 percent in two other districts in North Bohemia and North Moravia. On the other hand, the lowest unemployment rate was in and around Prague - slightly over 3 percent.
Analysts attribute the record unemployment in the Czech Republic to problems in the industry sector and its restructuring, an inflexible labour market, insufficient mobility of the workforce and a generous social welfare system. Another factor cited by some analysts is excessive wage demands in companies that have strong trade union organisations.
Many companies have resorted to job cuts in order to increase labour productivity and remain competitive. Moreover, thousands of former self-employed people are coming to employment offices, after the government decided they must pay a minimum tax even if they are in the red.
Some experts predict that in the next few months, new seasonal jobs in construction and agriculture and strengthening foreign demand may pull unemployment down by as much as one percent.
Czechs uninterested in some jobs despite record unemployment
The number of foreigners working in the Czech Republic has been growing steadily, and the situation has been criticised by the trade unions. The unions are calling for greater regulation of foreign labour and tougher control of illegal employment.
Skromach plans to tighten conditions for foreign entrepreneurs
Czech Labour and Social Affairs Minister Zdenek Skromach is reportedly planning to tighten the conditions for foreigners who want to obtain a business licence in the Czech Republic. The daily Mlada fronta Dnes wrote that according to the plan, foreigners would need to get a residence permit first and only then apply for a business licence. The ministry said however, that the plan has not been drafted in detail yet. At present, some 60,000 foreigners have a Czech business licence, most of them working in the construction sector, as well as retail trade and gastronomy. The daily quoted the chairman of the Czech Association of Construction Businesses Miloslav Masek as saying that foreign workers were needed, since there is a lack of trained Czech construction workers.
Czech construction firms merge to get billions from EU funds
Czech construction firms are merging so as to have easier access to large contracts financed from European Union funds. According to the business daily Hospodarske noviny, one of them is a building concern VCES, founded recently by a merger of 7 smaller East Bohemian firms. But mergers and acquisitions are taking place even among large players: the construction company Metrostav has signed a contract to acquire a 78-percent stake in Subterra, pending approval by the anti-monopoly authority. The chairman of the Czech Association of Construction Businesses, Miloslav Masek, was quoted as saying that consolidation is in progress and smaller firms have been disappearing. He said it was easier for large companies to win major EU-financed orders than small firms. The Czech Republic can get close to 2.5 billion euros from EU funds by 2006, of which almost 2 billion will go towards transport and environmental infrastructure projects.