Business News

In Business News: the government approves a package of tax and public spending reforms; the EC is to warn the Czech Republic that it is failing to keep its public deficit under the limit of three percent of GDP; the OECD forecasts a slightly slower economic growth for the Czech Republic; Czech companies have won a 120-million-dollar contract in Iraq.

Czech government approves spending, tax reform package

Miroslav Kalousek, Martin Bursik, Martin Riman, Mirek Topolanek and Tomas Julinek, photo: CTK

The centre-right Czech government this week approved a wide ranging package of tax and public spending reforms designed to ease a swelling public deficit. Cabinet approval opens the way for the controversial reform package to be voted on by lawmakers in June, with the future of Mirek Topolanek's government depending on the result. Mr Topolanek has pledged that his cabinet will resign if the reform package is not passed in full, stressing that possible adoption of the single European currency in 2012 depended on the measures.

The reform package's hallmark features include an across-the-board 15 percent tax rate, which represents a massive cut for the highest earners currently paying a top rate of 32 percent. As well as the single personal tax rate, company tax would be cut to 19 percent in stages by 2010 from the current 24 percent, and the lower rate of VAT raised from 5 percent to 9 percent. The government has also proposed a 3.0-percent annual cull in public sector employees over the next years.

EU to give Czech Republic deficit warning next week

The European Commission will warn the Czech Republic that it is failing to do enough to rein in its public deficit, an EU official said this week. The European Union launched legal action against the Czech Republic in 2004 requiring the country to bring down its deficit below an EU-limit of three percent of GDP by 2008. Although the Czech deficit is thought to have slipped to 2.9 percent last year after several years of overshooting the three-percent limit, the European Commission's most recent forecasts see it rising to 3.9 percent this year and then 3.6 percent in 2008.

OECD forecasts moderate slowdown of Czech GDP growth

The Organisation for Economic Co-operation and Development says that economic growth in the Czech Republic would slow down slightly in the rest of the year and in 2008 but would still remain high. According to OECD, Czech GDP growth will decrease from last year's 6.1 percent to 5.5 percent this year and to 5.0 percent next year. The organisation said unemployment in the Czech Republic that reached 7.2 percent last year would drop to 6.5 percent this year and to 6.1 percent in 2008. Public finance deficit should increase from last year's 2.9 percent of GDP to 3.7 percent in 2007 and could reach 3.5 percent of GDP the following year.

Czech households' savings up 11 percent in 2006

Czech households' savings at financial institutions grew by 11 percent year-on-year in 2006 to 2,100 billion crowns, while households' debts rose by almost 30 percent to over 540 billion crowns, according to a Finance Ministry report. Most of the savings are deposited at banks, but deposits at pension and mutual funds have also been rising. An unrelated survey by the Factum Invenio agency suggests that Czechs prefer to keep their savings on their current accounts or at home. According to the poll, every second Czech keeps his or her savings in the house.

Czech companies win 120-million dollar Iraq refineries contract

A consortium of Czech companies led by Technoexport has been awarded a 2.5- billion-crown (almost 120-million-dollar) contract to provide equipment to Iraq refineries, the consortium announced on Thursday, adding the fact that the former Czechoslovakia built around 60 percent of Iraq's refinery capacity helped in winning the order. The companies will provide atmospheric distillation equipment for refineries in the Baghdad and Basra areas.

Czech Airlines cuts losses in first quarter of 2007 to 122 million crowns

Czech Airlines (CSA) posted a 122-million crown loss in the first quarter of this year, an improvement of almost a billion crowns against the same period last year, CSA president Radomir Lasak said this week. The growth in revenues reflects in particular an increase in passenger transport. Passenger numbers exceeded 1 million in the first three months of 2007, a growth of 5.2 percent compared to the same period of last year. The company's performance also improved following the sale in February of five Boeing 737 aircraft that the firm now uses based on a leasing contract. The national air carrier, 90 percent controlled by the state, ended last year with a loss of nearly 400 million crowns.

Czech Republic world's largest poppy grower for second year

The Czech press reported this week that the Czech Republic has been the largest poppy grower in the world for the second consecutive year by the area planted. According to data supplied by the association Cesky mak (Czech Poppy) and the Agriculture Ministry, Czech farmers are growing poppy on some 70,000 hectares this year, an increase against the previous year when 31,600 tonnes of the commodity was harvested from almost 58,000 hectares. In the 1990s, poppy was grown on nearly 10,000 hectares in the Czech Republic. One of the factors behind the expansion of poppy growing is the rising wholesale price of poppy seeds that tops 30 crowns per kilogramme. Almost all poppy grown in the Czech Republic is used in food production.