Business News

Photo: Commission européenne

In Business News this week: as the financial crisis continues, analysts predict lower GDP growth in the Czech Republic in 2009; a marked fall is seen in investment in commercial property; the Czech Republic doubles bank deposit guarantees, while the central bank begins offering loans to banks guaranteed by government bonds; the head of the Confederation of Industry says the government should suspend discussions about euro adoption; and big privatisation projects are going ahead despite the financial crisis, with Aeroflot reported to be the favourite to buy Czech Airlines.

Analysts predicting GDP growth to fall to 2.5 percent

Regardless of government reassurances that the Czech economy is largely insulated from the ongoing global financial crisis, there are signs that it is having, and will have, an impact. Share prices on the Prague Stock Exchange fell significantly in the latter half of the week, while in the real economy analysts from Patria Finance and Erste Bank have revised projected GDP growth for 2009 from 3.1 to 2.5 percent.

At the same time, the bank CSOB blamed the crisis for a two-thirds fall in its profits, while investment in offices, shopping malls and warehouses in the Czech Republic fell by 42 percent in the third quarter of this year, according to the property consultants Cushman & Wakefield.

No flight of money over bank guarantees, says Czech finance minister

Czech leaders clashed with other EU officials this week at a summit in Brussels over a plan to reform the banking sector, but eventually accepted the proposals. Prague has been extremely critical of EU states giving 100-percent guarantees on banks deposits, saying that would increase liquidity in some states at the expense of others. However, despite a number of neighbouring states having introduced 100-percent guarantees, the Czech finance minister, Miroslav Kalousek, said there was no marked sign of Czech clients transferring their money to accounts elsewhere. Mr Kalousek also announced an increase in guarantees for deposits in Czech banks from 25,000 to 50,000 euros.

CNB provides loans to banks backed by government bonds

Czech National Bank,  photo: Štěpánka Budková
The Czech National Bank, meanwhile, has begun offering loans to banks guaranteed by government bonds, in a bid to support the frozen bond and financial markets. At the same time, the Finance Ministry has for the second time cancelled a bond issue, with a representative saying the ministry didn’t want to further complicate the current situation.

Industry leader calls for suspension of euro adoption discussions

The president of the Czech Confederation of Industry Jaroslav Míl has said the government should temporarily suspend discussions on adopting the euro, in view of what he called the European Union’s “scary” handling of the crisis. Meanwhile, many exporters – hard hit by the strength of the crown – continue to push for Prague to set a target date for becoming part of the eurozone.

Privatisations to go ahead, with Aeroflot favourite to buy Czech Airlines

Photo: European Commission
Despite the financial crisis, the Czech government is moving ahead with a number of big privatisation projects, Hospodářské noviny noted on Friday. Among the planned sell-offs, the newspaper reported that Russia’s Aeroflot was the clear favourite to buy Czech Airlines, while around 60 investors have expressed interest in Prague Airport.