Business News

Photo: CTK

In the week’s business news: the Czech government goes out of its way to reassure the public that the Czech economy will not be directly threatened by the global economic crisis, although a fall in growth is expected. A leading Czech glass maker axes two big companies, putting 1,800 people out of work, and 700,000 households are bracing for a steep rise in rents next year.

Czech Republic not directly threatened by global crisis

Mirek Topolánek,  Miroslav Kalousek and Zdeněk Tůma,  photo: CTK
Leading government officials and the head of the Czech National Bank went out of their way this week to reassure the public that the Czech economy would not be directly threatened by the global economic crisis and that people’s savings were not in jeopardy. Prime Minister Mirek Topolánek, National Bank governor Zdeněk Tůma and Finance Minister Miroslav Kalousek said at a joint press conference on Thursday that no special measures were needed in connection with the crisis and that the government did not plan to amend its draft budget for 2009, even if the economy slowed down as a result of slower growth elsewhere in Europe. The finance minister said that the economy was healthy and could cope with a weaker performance, partly thanks to public finance reforms that have reduced corporate taxes.

Fall in growth expected

Foto: Kristýna Maková
The Czech economy is forecast to grow by 3.4 percent next year, compared with last year’s record 6.6 percent growth. A moderate revival can be expected in the following years. Independent analysts predict that for a time Czech economic growth will be pulled by households instead of exporters. With lower inflation expected, households will have more money to spend. Wages are expected to grow at the same pace as this year, but there are concerns over unemployment as a result of slower economic growth and a stricter credit policy. As the Czech finance minister put it “the good times are over”, but he said things would now be “normal, rather than negative.”

Prague Stock Exchange reflects insecurity over US bailout plan

Like stock markets elsewhere, the Prague Stock Exchange fluctuated throughout the week, reflecting widespread insecurity over the US bailout plan. Shares fell steeply on several occasions and many investors focused on short-term profits, selling shares within a day or two of acquiring them. Analysts predict that a single trend is likely to return on Monday after the result of voting on the bailout plan in the US House of Representatives is known.

Fall in trade turnover reflects worsening economic climate in Europe

The Czech Republic posted a foreign trade surplus of 3.6 billion crowns (206 million US dollars) in August as imports and exports fell the fastest in six years, the National Statistics Office said Friday. Exports in August fell by 8.1 percent, while imports dropped 10.1 percent. The total trade volume was at its lowest since August 2006. Analysts say the foreign trade figures indicate to what degree the Czech economy is affected by the worsening economic climate in Western Europe.

Leading Czech glassmaker axes two big companies

Photo: CTK
Fear of unemployment was strong this week as the country’s leading glass producer Bohemia Crystalex Trading announced plans to axe two of its four plants due to severe financial difficulties. The move will put 1,800 people out of work. Although the government has refused to save the plants with a financial injection, it is planning to release several million crowns in support of re-qualification and new job opportunities in the regions affected.

Rents expected to soar in some areas in 2009

Regulated rents in some Czech towns will grow by almost 50 percent as of January 2009, the news agency CTK reports citing a poll among town halls. Rents in standard first-category flats will grow the most in Zlín, Strakonice and Kutná Hora. Rents will also increase by more than 40 percent in some Prague districts. Deregulation will go into its third year in 2009 and the annual rent in most flats should reach 5 percent of a flat's market price in 2010 when the deregulation process should be completed. There are more than 700,000 households with regulated rents in the Czech Republic.