Business News

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The Ministry of Finance has revised its macroeconomic forecast. The Czech parliament has overturned a presidential veto of a new law on Value Added Tax. The Czech government has agreed to sell the country's biggest downstream oil group Unipetrol to Poland's PKN Orlen. World Bank experts are coming to help the Czech Republic with a reform of the country's health sector. News from the car market - prices on the decline, Skoda to launch new mini model. Five percent of Czech households and companies have problems with repaying their loans and over 3 percent of Czech households live below the poverty line.

Czech GDP growth to speed up to 3.1 percent in 2005

The Ministry of Finance estimates that the Czech GDP growth will accelerate to 3.1 percent next year from this year's 2.8 percent. On the other hand, inflation is expected to drop to 2.8 percent from this year's 3.1 percent. The ministry said on its website it kept GDP and inflation estimates for this year unchanged, but it had raised its jobless rate estimate by 0.2 percentage points to 10.5 percent. Next year, the ministry expects unemployment to rise to an average 10.7 percent.

VAT rates to change as of May 1

The Czech parliament at the end of last week overturned a presidential veto of a new law on Value Added Tax. The law is essential for smooth entry to the European Union's single market on May 1, and for the government's fiscal reforms. Besides other things, it reduces the 22-percent VAT rate to 19 percent, and moves many goods and services from the preferential 5-percent rate to the upper bracket.

Government sells Unipetrol to PKN Orlen

The Czech government agreed to sell the country's biggest downstream oil group Unipetrol to Poland's PKN Orlen, the sole bidder. PKN Orlen offered just over 13 billion crowns for the state's 63 percent stake. British-Dutch concern Royal Dutch/Shell had pulled out of the tender, while Hungarian company MOL abandoned its plans to submit a bid. PKN Orlen made the bid independently, without official partners. However, in January it signed a preliminary agreement with US giant ConocoPhillips. Unipetrol had been privatised before but the winner of the tender, Czech chemical group Agrofert, failed to pay the purchasing price and the government decided to call a new tender.

FinMin: structural reforms needed before euro adoption

Photo: European Commission
The Czech Republic will need structural reforms of its labour market and business environment to be able to adopt the single European currency euro, according to Czech Finance Minister Bohuslav Sobotka. The Czech Republic has been struggling with a high public finance deficit. Mr Sobotka said the Czech Republic wanted to cut the deficit to four percent of GDP by 2006, from some six percent expected for this year. He believes the country will comply with the Maastricht fiscal criteria, a set of limits necessary for euro adoption, by 2008, provided the next Czech government continues with fiscal reforms. The Czech government plans to introduce the euro by 2010.

WB to start assessing Czech health sector in May

The World Bank will send a group of experts to the Czech Republic in May to assist with a reform of the country's health sector. According to the World Bank, the Czech Republic has the same problems in its health care sector as other developed countries, including unsustainable growth of health spending and overall inefficiency of the system. World Bank experts have been advising the Czech Republic on a reform of the pension system, and will also help draw up new legislation on bankruptcy.

Czech Airlines to buy new mid-range aircraft

Czech flagship carrier Czech Airlines will open a tender in the coming days for 12 airplanes to renew its mid-range fleet. The state-owned company said its supervisory board gave the nod to a plan to ask the world's two top passenger airplane makers, Boeing and Airbus, to supply bids. The company said in a statement that both the new generation of Boeing 737 and planes of the Airbus A320 family fulfil CSA's demands for modernisation of its mid-range fleet. Czech Airlines, a member of the Sky Team alliance led by Air France and Delta, now have 28 Boeings 737 serving mid-range destinations. CSA will also add one Airbus A310-300 to its long-haul fleet this year.

Carmakers want to boost sales by discounts

Car producers are trying to attract customers in the Czech Republic by unprecedented discounts in order to boost sales of new cars, which fell by 10 pct year-on-year in the first quarter of the year. A cut in the VAT rate from the current 22 percent to 19 percent scheduled for May 1 should bring a further drop in prices. EU accession will also make it possible for prices of Japanese and Korean cars to decrease. Currently, cars made outside the EU are subject to a customs duty of 17 percent, but after May 1, this duty will decrease to 10 percent. Importers denied that prices would decrease by that much. The overall level of car prices in the Czech Republic is roughly 4 percent below EU prices, partly because of the lower purchasing power of the population.

Skoda Auto to start producing super economy cars

Czech car maker Skoda Auto is planning to launch the production of the first mini car in its history. The daily Mlada Fronta Dnes quoted Skoda sales director for Central and Eastern Europe Lubos Kopecky as saying that the decision has already been made, and the date for the launch of the production has been set. Skoda's parent company, Volkswagen, had been considering the production of super economy cars for some time, originally planning to replace the Superb limousine with them. VW eventually decided that the Superb will have a successor in the same category and the mini will be added to Skoda's portfolio.

Five percent of households have problems with repaying loans

Five percent of Czech households and companies have problems with repaying their loans, according to experts quoted by the daily Lidove noviny. However, the volume of classified loans differs in individual banks, ranging from less than 2 percent to 3.5 percent. Czech households continue to take credit at an unprecedented rate. The overall household indebtedness increased by nearly 57 billion to over 230 billion in 2003 and banks reported further growth in the first quarter of 2004. Economists have warned that the volume of unpaid loans might increase if the economic situation changes. An interest rate hike for instance may raise instalments considerably.

Over 3 percent of Czech households live below poverty line

According to a survey conducted by the Czech Statistics Office, more than 130,000 Czech households live below the poverty line, which is over three percent of the population. However, when calculated using EU methods, the number of households below the poverty line is twice as high. The poorest families earned slightly over 30 thousand crowns, or around a 1000 USD, a year in 2002, with the income comprising mainly social benefits. The statisticians also said the gap between the richest and the poorest ten percent had further widened, with the income of the upper decile being six times higher than that of the lower decile. The poorest households are mostly those of manual workers and the unemployed, young families with several children, and single-parent households.