Business News

In this weeks Business News: Czech car makers have announced that they may have to cut jobs in the first quarter of 2009; Škoda has just posted figures that reveal an 8.6 billion crown and nearly 25% fall in profits; the Czech Central bank has formally rejected the idea that a fast-track adoption of the euro may help the Czech Republic fight against the effects of the global financial crisis; a new prognosis from the Finance Ministry puts economic growth in 2009 at just 3.7%; Czechs are increasingly looking for bargains on the Czech stock exchange and household debts climbed steeply in October by around 14 billion crowns, according to the Czech National Bank

Czech car companies to cut jobs.

Photo: CTK

Czech car makers have announced that they may have to cut jobs in the first quarter of 2009. The reasons are clear – the global financial crisis has led to a fall in demand for cars. The Czech Republic is home to not only plants that make its domestic Škoda cars, but also a soon-to-open Hyundai plant as well as several others including a joint Peugeot-Citroen-Toyota venture. According to figures from the Automotive Industry Association, as many as 10,000 people could lose their jobs, mainly in the car-parts manufacturing side. An estimated 120,000 Czechs work in the car-making business, both directly for the major producers and in various ancillary companies. In 2007, car production represented a stunning 18 percent of Czech GDP. Earlier this month, Volkswagen, owner of Škoda halted production for a week due to decreased demand. Despite the apparent gloom, the AIA is actually predicting an increase in Czech car production in 2009 by around 2 percent.

Škoda sees fall in profits

Meanwhile, Škoda has just posted figures that reveal an 8.6 billion crown and nearly 25% fall in profits. The news comes despite the fact that the car-maker has also reported a 15% spike in sales on previous year’s figures. In the past eight months, Škoda has sold more than 530,000 cars, mainly for export. The losses are being blamed on the strong crown, which figures suggest has directly caused a 2.2% dip in turnover, which currently stands at 158.1 billion crowns. Volkswagen, the parent company of Škoda has reported a concurrent 5.5% increase in turnover in the Czech Republic, something which has surprised many analysts.

Czech Republic rejects euro adoption “cure”

The Czech Central bank has formally rejected the idea that a fast-track adoption of the euro may help the Czech Republic fight against the effects of the global financial crisis. The Czech Republic lacks a specific target date for euro-adoption, unlike neighbouring countries such as Poland, which has set 2012 as its aspirational target – though doubts persist over the viability of this date. Indeed, Czech Central Bank governor Zdeněk Tuma has stated that the Czech crown has in fact proven to shelter the Czech Republic from many of the effects of the global financial crisis. In order for euro adoption to take place, a currency must be pegged to the euro for two years, something that might prove troublesome as the Czech crown is viewed as being excessively strong at present. Mr Tuma has also noted this week that such a pegging would not be useful during such uncertain economic times.

Prognosis: Economic growth will fall to 3.7%

A new prognosis from the Czech Finance Ministry puts economic growth in 2009 at 3.7%. A previous forecast for the year back in July had estimated growth of 4.8%. The new figures are said to factor-in the reality of the current global financial crisis and the impact that it will likely have on the Czech economy. This year’s growth figures have also been revised downward a fraction of a percent, from 4.6% to 4.4%. A different forecast by the Patria Finance Group puts growth predictions even lower for 2009 – at just 2.5%, adding that Czech fortunes are closely tied to those of the Eurozone economies, which many analysts predict could find themselves in recession next year.

More Czechs buying shares as stock markets fall

Czechs are increasingly looking for bargains on the Czech stock exchange, according to the daily Hospodářské Noviny. Apparently, with stock prices falling, more and more Czechs are trying to find a bargain stock purchase. Shares have lost nearly a quarter of their value in recent months, and this has directly led some brokerage companies to report up to a three-fold number of clients seeking to purchase shares, reports the paper. Analysts state that with devalued shares, there is a concurrent growth in risk-taking, with stock-buyers hoping to snap up devalued stock that might show large increases in value at a future date. The trade has also led the aforementioned brokerage firms towards huge increases in not only client numbers, but also profits as well.

Czech household debts up in October

Czech household debts climbed steeply in October by around 14 billion crowns, according to the Czech National Bank. The total debt Czechs have towards banks and other financial institutions now totals 842.5 billion crowns. Meanwhile, Czech businesses owe an estimated one trillion Czech crowns (around 54 billion dollars) according to official figures. Despite the debts, the Czech financial sector has thus far escaped many of the credit-driven crises that have affected Western Europe.