Business News

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In Business News this week: the Labour Minister unveils plans to part-privatise the pension system; has the government started selling off shares in CEZ? The Finance Ministry predicts that next year's budget deficit will be below 3%; revenue from tourism rises in the first six months of this year; and Czech dairies have a tough time squaring up to foreign competition.

Labour minister unveils plans to part-privatise pension system

Labour Minister Petr Necas, photo: CTK
The Labour Minister Petr Necas unveiled his plans to part-privatise the pension system this week. On Friday, he explained his idea to Hospodarske noviny, giving the example of someone who currently pays 28% of his or her super-gross income into a pension scheme, paying 4% of this amount into a private pension fund instead. With public pensions expected to shrink by as much as 20% in the coming years, the government is hoping that its proposals will encourage people to secure their own retirement.

Such a system has already been implemented by governments in neighbouring Poland, Hungary and Slovakia. According to analysts, the scheme has been more popular than expected in these countries, placing a strain on the funding of state pensions. The opposition Social Democrats are against the government's plans.

Has the government started selling off shares in CEZ?

Rumours abounded this week that the Czech government had started its planned sell-off of shares in CEZ, the country's most profitable company. The Finance Ministry refused to comment, saying its statements might serve as price-forming information. The government originally decided to sell 7% of the energy giant in March. It estimated that the sale would bring in 31 billion CZK (15.5 billion USD), money which the government plans to spend primarily on road repairs.

Finance Ministry: 2008 state deficit will be below key 3%

At the beginning of the week, the Finance Ministry estimated that next year's deficit in the state budget would be something in the region of 70.8 billion CZK (3.5 billion USD). The deficit should account for 2.95% of the budget, which falls within the 3% limit set by the Maastricht criteria for the adoption of the euro.

The 2008 deficit should be lower than it has been for the last couple of years, as it reflects the changes brought about by the government's reform package, passed by the Lower House in August. State expenditure should rise by 66.5 billion crowns, while income is expected to go up by about 87 billion crowns.

Rise in tourism revenues for the first six months of this year

Despite predictions to the contrary, the number of tourists visiting the Czech Republic in the first six months of this year was up by 4%. And the amount they spent while on holiday was up too. Foreign exchange revenues from tourism rose to 57.3 billion CZK (2.87 billion USD) for the period spanning from January to June this year. According to state agency CzechTourism's statistics, this was a 10% rise on last year's figures. The upturn was attributed, among other factors, to the increased number of visitors staying overnight in the country. Germans top the list of those booking into a hotel or pension, with Russians and Brits following closely behind.

In run-up to the Schengen zone, Czech government to spend 187 million crowns

The Czech government has announced that it will be spending 187 million CZK (9 million USD) on improving police radio communication systems as part of the country's preparations for entering the Schengen area. The Czech Republic will be joining the Schengen zone on 1st January 2008, a move which will result in the lifting of the country's border controls with other EU member states.

Czech dairies losing out to foreign competition

And finally, the Bohemian and Moravian Dairy Association announced on Wednesday that Czech dairies were finding it hard to keep up with foreign competition. Last year, Czech milk output amounted to a healthy-sounding 2.6 billion litres. But, according to an industry spokesperson, a large quantity of this was sold to foreign producers, instead of being used to produce higher value products, like cheese and yoghurt, domestically. The Czech Republic then bought in the majority of its cheese from abroad. But still, it looks like there is little need to cry over exported milk, as farmers can expect a rise in the value of their 'white stuff', from 7.9 CZK a litre to 8.2 CZK a litre, in the coming months.