In Business News this week: The Czech National Bank raises its estimate of Czech economic growth in 2010, the central bank leaves interest rates unchanged and amidst planned lay-offs in the public sector, Škoda Auto makes the single biggest recruitment of employees since the beginning of the crisis.
Photo: Barbora Kmentová
The Czech state budget deficit decreased to 69 billion crowns or 3.6 billion dollars in July from June’s 75 billion and the gap is also lower in annual terms, the Czech Finance Ministry said this week. Due to phased-out cost cutting measures state budget expenditures for 2010 –originally forecast at 162 billion crowns -are expected to be 28 billion crowns lower. The ministry said lower capital expenditures of the state in 2010 were a major factor behind the decrease.
Czech National Bank, photo: Štěpánka Budková
The Czech National Bank has raised its estimate of Czech economic growth in 2010 to 1.6 percent in its latest forecast from the previous 1.4 percent. For next year the GDP growth estimate remains at 1.8 percent, while in 2012 the economy is expected to grow by 2.9 percent. According to central bank governor Miroslav Singer the recovery is still relatively fragile and the estimates do not take into account the planned budget cuts.
Photo: Štěpánka Budková
The executive board of the central bank left interest rates unchanged on Thursday, the key rate staying at a record low of 0.7 percent. The decision was expected in view of the fact that inflation is low and the economy is showing a gradual revival. The last time the bank slashed interest rates was in May of this year. According to central bank experts the rates are expected to remain unchanged, with a gradual rise predicted in the second half of 2011.
At a time when lay-offs are expected in the public sector, the car maker Škoda Auto is taking on a thousand new employees. The recruitment is the result of growing demand, in particular for the models Superb and Yeti. Figures for the first two quarters show an operating profit of 5.9 billion crowns, which is a year-on-year increase of 40.6 percent. The daily Hospodářské Noviny says this is the biggest single company recruitment since the beginning of the recession in 2008.
Czech employees earning more than 20,000 crowns a month gross (1,000 US dollars) get paid an above-average salary, according to a median survey on Merces.cz. The average wage in the Czech Republic is currently 23.000 crowns a month but the figure is significantly influenced by the high salaries of a select group. The banking sector shows the biggest difference between the average salary and the median. While the average salary in the banking sector in reported to be close to 30,000 crowns, the median is 26,000 reflecting the fact that 56 percent of employees get paid less than the average – between 18 and 21 thousand.
The new labour minister, Jaromír Drábek, has come under fire from trade unions for proposing changes in the labour code such as firms being able to keep new employees on a short term contract for a period of five years instead of the present two and employees who resign of their own accord not being eligible for unemployment benefits. The minister would like to see the changes introduced by the end of the year. Trade unions counter that some employees are forced to resign as a result of mobbing or not getting their salary paid for several months in succession. The minister would also like to see the present severance pay of 5 months lowered to between 1 and 3 months depending on the length of time the employee had spent with the firm.