Business News

In Business News this week: stark predictions of a shrinking economy from the Finance Ministry; snub for local film sets; euro adoption pledge from Social Democrats; pump maker blues; and what the Big Mac says about the economy.

Finance Ministry almost doubles GDP decline forecast

The biggest news this week has been the Ministry of Finance’s much gloomier prediction of the depth of the economic crisis. It has almost doubled its estimate of how much the economy will shrink this year to 4.3 percent of Gross Domestic Product. Just three months ago in April the prediction was for a 2.3 percent fall this year. One of the main reasons for the revision is the much sharper fall in exports than originally expected. If confirmed, the economic decline will be the biggest to hit the Czech Republic.

Star Wars director shoots down Czech chances of major series

Star Wars’ director George Lucas has dealt a blow to the Czech film industry by saying he is likely to take filming of a major Star Wars tv series elsewhere. Lucas – who previously produced films in the country – has told the media he prefers to take his projects where the best crew and best tax incentives are. While the Czech film industry might still qualify on the former count it definitely does not on the latter. No national tax incentive programme for foreign filmmakers is in place. Local film production companies warn that 2009 is turning into the worst year ever for foreign film projects.

Euro adoption pledge from Social Democrats

Leading left wing party, the Social Democrats, has promised to do everything to adopt the single currency euro by 2015 at the latest. The pledge has come from the party ahead of early elections in October. The news should be welcomed by businesses in the export oriented Czech economy which have been hard hit by the high riding crown. But there is a problem. Much of the rest of the Social Democrat platform promises increased spending likely to deepen the annual public spending deficit. This needs to be curbed for being accepted in the euro club. Social Democrat economic experts have warned this year’s deficit could swell to 6.0 percent of GDP, twice the level permitted for euro adoption.

Auto parts maker warns of short time until 2010

If there are signs that the recession may be easing in some sectors of the economy, they are absent elsewhere. Bosch Diesel which employs 5,000 around the central city of Jihlava has announced that it will continue four day working into March 2010. It says that demand for the pumps it produces for diesel-powered cars has still not picked up. Four-day working was launched in February. One of the problems is that the old for new scrap car incentives that have spread across Europe have mostly favoured smaller petrol-driven cars and not the bigger diesel models.

The Big Mac message for the Czech economy

The Economist magazine’s Big Mac index has put the Czech Republic just ahead of the US when it comes to the price paid for the famed fast food item. Czechs pay 3 dollars 64 cents for a Big Mac which compares with 3 dollars 57 cents in the states. The Czech Republic still comes in under the EU Big Mac average price of 4 dollars 62 cents but is now around a third more expensive that Poland. A year ago the price of a Big Mac was around a quarter higher in the Czech Republic than the US and about the same as in Poland.