Business News

In Business News this week: recession strikes; unemployment stabilises; hard coal producer announces layoffs; Orco confirms the worst; and the steady advance of a sunrise industry.

Czech Republic officially in recession

Photo: Štěpánka Budková

According to the most widely used definition – the Czech Republic has fallen into recession according to official figures released this week. The economy shrunk by 3.4 percent in the first quarter of the year compared with the previous three months. This follows on from a 1.2 percent fall in Gross Domestic Product in the last quarter of 2008. For most economists, a fall in two successive quarters equals a full recession. The Czech economy also fell in the first quarter by 3.4 percent compared with the same period a year earlier. This is the biggest annual drop in recent history.

Unemployment stabilises in May

On a brighter note, another indicator of gloomy times has stopped getting worse. Czech unemployment stabilized at 7.9 percent in May, the same rate as in April according to ministry figures this week. Analysts had expected the number of jobless seeking work to creep up to 8.0 percent. The ministry said the slowdown in the recent surge in joblessness was partly due to the start of seasonal work.

Coal jobs to go on back of steel slump

But the worldwide slump in the steel industry has hit the Czech Republic’s biggest producer of hard or black coal. Mining company New World Resources has announced plans to lay off 3,000 workers. Around half of those will be from the mining division, another 500 will lose their jobs following the closure of a coke plant and 1,000 in across the board cuts. Much of the company’s coal is used for making steel. But steel production in Central Europe has almost halved over the last year.

Orco confirms the worst

The state but not fate of real estate development giant Orco has become a bit clearer after its long awaited audited results were released this week. The company – which is one of the biggest developers in the Czech Republic – has been the focus of much attention because of its enormous debts and fears it might go bust. In the end, the latest results more or less confirmed earlier figures of a 390 million euros loss for 2008. Media reports now say Orco’s future depends on whether US investment company Colony Capital is willing to buy a majority stake in the developer.

Solar power surge continues

The Czech solar energy boom is set to continue. One of the biggest developers in the country – Energy 21 – has announced plans to invest 1.4 billion crowns in new projects over the coming months. That investment should boost its electricity production capacity six fold to around 40 MegaWatts. The boom has been fuelled by lucrative government grants for renewable power and a sharp reduction in the cost of solar panels.