Business News

Economy grows by 1.2% in 3Q; criminal liability for companies passes parliament; fifty billion crowns in deals for Czech and Russian businesses; inflation accelerates to 2.5%; construction continues decline.

Economy expanded by 1.2 percent in 3Q

The Czech economy expanded by 1.2 percent in 3Q year-on-year, a drop of 0.3% compared to the preliminary estimate. Gross domestic product fell by 0.1% against the preceding quarter, while the preliminary estimate predicted stagnation. The main source of demand growth was external trade, with the rate of export growth markedly higher than that of import. On the supply side of the economy, the manufacturing industry played a major role in the year-on-year increase of gross value added. Statisticians say that the GVA volume generated by manufacturing in the third quarter of this year was almost 11 percent higher than a year earlier. The industry benefited from increases reached in the preceding quarters, however. It failed to achieve the level of Q2 2011. GVA in total increased by 1.1 percent over the year, while it stagnated compared to the second quarter this year.

Criminal liability for companies passes parliament

The Chamber of Deputies again passed a bill to introduce criminal liability for companies from 2012, overturning a presidential veto. Under the legislation, courts will be able to impose fines on companies, confiscate their assets and even dissolve them in cases of serious offences. The major change was initiated by the government in order to combat organised crime and corruption and to synchronise legislation with the EU and the OECD. With the Social Democrats joining the ruling coalition to pass the bill, the only real opposition it faced was President Václav Klaus, who argued that an institution could not commit a crime, only a person. Under new legislation it will be possible to prosecute companies for almost 80 crimes, for instance, for the legalisation of proceeds from criminal activities, counterfeiting, tax evasion or unlawful possession of nuclear material.

Czech and Russian businesses sign deals for fifty billion crowns

Dmitri Medvedev, Václav Klaus, photo: CTK

Czech and Russian business leaders concluded contracts worth over fifty billion crowns under the approving gaze of Russian President Dmitri Medvedev and Czech President Václav Klaus on Thursday. The largest deal was for the construction of 400km of rail in the Ural Mountains worth nearly 40 billion crowns – a contract won by the Brno-based company OHL ŽS. The Czech company Alta Invest and the Russian nuclear fuel producer Tvel established a new company called Alvel which will be based in the Czech Republic and handle fuel cell services for the European market. Czech companies also secured three other multi-billion crown projects for the construction of fossil-fuel power stations and a chemical factory. The unique opportunity to conclude so much business could not have come at a better time according to analysts, with the Czech economy requiring more markets outside the EU.

Inflation accelerated in November to 2.5%

Photo: Barbora Kmentová

The Czech Statistical Office reports that year-on-year inflation in the Czech Republic accelerated in November to 2.5%, up .2 points from October. Consumer prices increased 0.4% compared to the preceding month with price hikes in foodstuffs, non-alcoholic drinks and housing driving the growth. With regards to foodstuffs, sugar, coffee and bread all saw large price increases of 35, 31 and 19% respectively. Where living costs are concerned, rents increased by only 3.7% while the price of gas grew by 18.3. Meanwhile the average price of diesel oil went up to 35.31 CZK per litre in November, slightly exceeding the highest ever price from June, 2008. Unemployment also rose slightly in November, topping 8%, while the number of jobs decreased by 1,900.

Construction continues decline

Construction in the Czech Republic continued its decline from October, down almost one full point to 8% in November year-on-year. Analysts believe the sector is still a ways away from bottoming out, and will continue to decline in 2012, with less private and public orders. The average number of employees in companies with 50 workers or more decreased in October by 8.5%. Orientation values in fact decreased in almost all areas of construction, particularly in regards to new construction. According to the Czech Statistical Office the decline was led by eco-structures, the orientation value of which peaked one year ago due to the massive allowance of photovoltaic power stations.