Unemployment reaches lowest level for two years

There was some positive news here in the Czech Republic on Thursday, as the rate of unemployment dropped by 0.4 percent to 8.3 percent. Long-term, the news is even better, as this is the sixth month in a row that the unemployment rate has fallen, and it's now at its lowest level since May 1999 when the Czech economy was in the midst of recession. Nick Carey has this report.

After the recession that hit the Czech Republic in 1998, the news over the past few months has been mostly good for the Czech economy. Economic growth is back on the increase, industrial production is up, and direct foreign investment has reached record levels. Thursday's announcement that unemployment figures were down for the sixth month in a row came as an added bonus. The figures are pleasing - at the end of April 2001, there were 433,000 people listed as unemployed in the Czech Republic, a drop of almost 18,000 on the month before. This is in part due to seasonal job increases in areas such as construction, but there are other factors.

The Social Democrat government, for instance, claimed earlier this week that its policies since it came to power in 1998 have led to increased economic growth and, as a result, lower unemployment. According to macroeconomic analyst Radomir Jac of Commerzbank, this is, to a certain extent, true, because of the government's active encouragement of direct foreign investment:

"If we want to identify what is behind the recovery of economic growth in the Czech Republic, it is the recovery of investment activities. The recovery of investment activities is linked to the flow of direct foreign investment into the Czech economy. Obviously, government policies have made a positive contribution to this influx. We can debate how strong this contribution has been, but it was positive."

The lowest unemployment rates were recorded in Prague and Central Bohemia, as they have been for years now, while the highest levels were to be seen in the industrial areas of Northern Bohemia and Northern Moravia. According to analyst David Marek of Patria Finance, these areas face further difficult times, because their workforces have not been adequately re-trained for employment in other industries:

"This is difficult because it's a question of economic structure. In these regions, Northern Bohemia and Northern Moravia, there are concentrated sectors of what we call the old economy, this means mainly mining and so on. It will be difficult to lower the rate of unemployment in these regions because they have a high number of people who were trained to work in these specific industries."

On the whole though, says Radomir Jac of Commerzbank, the mid-term future looks good for the Czech economy:

"The outlook is certainly better than it was two or three years ago when the economy was still in recession. I believe that by the end of this year, the unemployment rate could drop to eight percent. Market forecasts put the figure at eight to eight and a half percent. In the mid-term, I am optimistic and I believe that as the recovery of economic growth continues in the Czech Republic, the unemployment rate can continue decreasing to below eight percent within the next two years."

David Marek of Patria Finance is similarly optimistic:

"In the coming months, I expect the unemployment rate to carry on declining due to seasonal factors, and in the second half of the year, the unemployment rate could be slightly higher. However, the trend is still declining and I am quite optimistic."