In this week's Business News: the Czech Central Bank slashes interest rates by three-quarters of a percentage point, while downscaling its GDP growth forecast again; the majority French-owned Czech bank Komerční Banka has posted profits of 9.94 billion crowns for the first nine months of 2008; a new survey suggests that Czechs are likely to spend significantly less during the Christmas period than last year; the Czech government is seeking to write-off the majority of a nearly one billion crown debt owed by Russia since the Soviet era and Czechs and Poles are increasingly losing interest in working in Britain.
Czech Central Bank slashes interest rates
Czech National Bank, photo: Štěpánka Budková
In a surprise move, the Czech Central Bank slashed interest rates on Thursday by three-quarters of a percentage point. The base rate has thus fallen to 2.75 percent, with the cut being greater than many analysts had forecast. The move followed similar steps taken by other countries, with the Bank of England cutting interest rates by 1.5 percent on the same day, while the European Central Bank cut rates by half a percent. The Czech move is designed to make borrowing easier for businesses and individuals, which in turn it is hoped will stimulate the economy. Yet the relative strength of the Czech economy is, analysts say, allowing Czech economists to prepare the country for a so-called “smooth landing” as the economy slows down – but avoids recession – in response to the global slowdown.
Growth forecast falls again
Meanwhile, the Czech Central Bank has again down-scaled its growth forecasts for 2009, describing the new prediction as significantly lower than previously anticipated. The new GDP growth forecast for 2009 now stands at 2.9%, down from the previous prediction of 3.6%. Meanwhile, the bank has also upped its revised 2008 forecast from 4.1% growth to 4.5%, a sign that the global economic slowdown has not impacted the Czech Republic as severely in the very short term as had previously been anticipated. A 2010 forecast has also been made by the bank of 3.1% GDP growth, signaling that the bank expects a turnaround in the fortunes of the Czech economy by the end of next year. Last year’s economic growth stood at a record 6.6%, something that analysts do not expect to see again for some time.
Komerční Banka increases profits by a stunning 22 percent
The majority French-owned Czech bank Komerční Banka has posted profits of 9.94 billion crowns for the first nine months of 2008 – a 22% increase on previous figures, according to information released by the company. The data suggests that customer deposits have gone up by 8.5%, while its available credit has risen to 364 billion crowns. The bank makes around six billion crowns a year from charging its customers controversial banking fees and has approximately 1.6 million customers. Rival banks Česká Spořitelna and ČSOB have also released new figures, with the former showing a 73% increase in profits to 14 billion crowns; the latter, however showed a 63% fall in profits to 2.8 billion crowns.
Economic woes may affect Christmas-time spending
Photo: Kristýna Maková
A new survey by the MNS polling agency suggests that Czechs are likely to spend significantly less during the Christmas period than last year. The survey indicates that on average, Czechs are willing to spend about 5000 crowns on Christmas presents this year, down three thousand crowns from figures released by a different polling organisation in 2007. A separate survey conducted this year by a large food producer suggests that on average, Czechs may in fact only be willing to spend around 3600 crowns this year during the festive period. The reasons are simple, concerns over the economy and rising prices have led Czechs to become more frugal with their money. The figures are also likely to cause concern to retailers who bank on strong Christmas sales.
Czech government considers writing-off communist era Russian debts
The Czech government is seeking to write-off the majority of a nearly one billion crown debt owed by Russia since the Soviet era. Around a third of that sum is likely to end up in state coffers, while the other two-thirds are written off as part of a complex deal involving the company BMC Agro-industry, which took over much of the debt. A number of years ago, the complex arrangement was subject to anti-corruption police intervention as a number of planes were given by Russia to Czech as part of the deal – but questions were soon raised about the legitimacy of the arrangement. The location of those planes remains a mystery till this day. In a separate case, the Czech government is also working to settle debts that the state of Libya has towards the Czech Republic.
Czechs and Poles losing interest in working in Britain
Photo: European Commission
Czechs and Poles are increasingly losing interest in working in Britain – once seen as an economic powerhouse able to provide them with jobs, according to the Czech daily Lidové Noviny. During the 1990s, Czechs and Poles flocked to Britain for anything from au-pair to manual labour jobs. Yet this year, 100,000 Poles are estimated to have left Britain, while Czechs too are increasingly looking elsewhere (such as Norway or Switzerland) or staying in their home country. Two concurrent reasons are playing a role: firstly improving economies at home, and secondly a significant downward turn in the British economy means fewer jobs are available.
