Business News

In this week’s Business News: forecasts concur on higher growth this year but lower next; steel giants agree peace deal; public finances give out mixed signals; Agrofert arbitration claim suffers setback; and flying the flag for Czech food and drink.

Finance Ministry and central bank boost growth prediction for 2010 but cut hopes for 2011

Photo: European Commission

The Czech Ministry of Finance and Czech National Bank took similar steps this week to increase growth forecasts for this year and cut them for next. The Finance Ministry has upped its prediction for economic growth this year to 2.2 percent from 1.6 percent earlier. But it sees weaker growth in 2011 of 2.0 percent, down from its previous call of 2.3 percent. The central bank is more upbeat about this year, predicting 2.3 percent growth compared with its August figure of 1.6 percent. But it sees government austerity measures and higher interest rates next year pushing growth down to 1.2 percent, compared with its earlier 1.8 percent.

Pig iron dispute ends with fragile peace deal

A battle between two of the country’s biggest steel concerns has ended with a peace deal between them. The five-month battle came to a head in the summer with Evraz Steel Vítkovice cancelling its order for pig iron deliveries from fellow Ostrava company ArcelorMittal after weeks of haggling over the price of the basic commodity. The two companies have now agreed terms for deliveries to resume, allowing Evraz to restart production of steel slabs, plates and sections from the start of December. But the deal is only valid for the next year with experts warning that the volatile price of steel could lead to a further fallout afterwards.

Windfall income cuts public deficit figure for 2010

Photo: Štěpánka Budková

The Czech public finance deficit will fall to 5.1 percent of Gross Domestic Product this year from 5.8 percent in 2009, the Ministry of Finance said this week in a regular update of spending and revenues. The figure is an improvement on the original target of 5.3 percent, but the ministry warned that it was partly a result of windfall income and not any fundamental improvement in housekeeping. The drift of the more narrowly defined state spending and income this year shows a 3.8 billion crown overshoot so far on the targeted 164 billion crown deficit. Central government revenues are down almost 15 billion crowns, with spending undershooting to the tune of almost 11 billion.

Agrofert’s multi-billion arbitration claim against Polish refiner rejected

Czech billionaire Andrej Babiš and his agro-food and chemicals empire Agrofert appears to have lost a 20 billion crown. 1.1 billion US dollar, demand for damages from Polish chemicals giant PKN Orlen. The damages claim is the last and biggest of a series harking back to 2005 and the privatisation of Czech refinery company Unipetrol. Mr. Babiš says the Poles went back on their promise at the time to sell him a series of Unipetrol units in return for his help during the privatisation. But an arbitration court in Prague this week refused his claim. PKN said afterwards it had not even made any provision for losing because it was so confident of its case. Mr. Babiš can still appeal the ruling but his chances look slim.

Czech flag to fly on local food and drink

The Czech flag could soon be flying on around 2,000 products as part of a campaign by the national food and drinks federation to boost the chances of local producers on the market. It hopes to launch a flag bearing quality badge next year with backing from European and Ministry of Agriculture funds. The ministry says changing supermarket and shoppers’ buying habits are the best ways to help struggling local farmers as direct subsidies are cut. Meanwhile, dairy farmers are launching their own three-year campaign to boost milk consumption. The “white plus” campaign seeks to push home the health advantages of drinking milk.