In today’s business news: Consumer prices have risen by 4.7 percent following a VAT hike, the American Anheuser-Bush purchases the Budějovický měšťanský brewery in hopes of improving its chances in an ongoing trademark dispute, public health insurer VZP may see a budget deficit of up to three billion Czech crowns in 2012, regular and diesel fuel reach record prices, and the forecast for the Czech construction sector for 2012 is the worst among the Visegrad Four.
An internal audit in the power producer ČEZ found no corruption in the firm’s dealings with its major supplier, Škoda Power. The audit confirmed a marked increase in contracts for the engineering company worth billions of crowns after 2004 when its former manager, Martin Roman, became the CEO of ČEZ. However, the surge was related to an overall rise in ČEZ investments, according to the probe which reviewed 39 contracts between the firms worth 26.4 billion crowns. Former ČEZ CEO Martin Roman, who stepped down in September, faced allegations of conflict of interest over his role in ČEZ and Škoda Power. However, critics pointed out the audit would have more weight if it had been carried out by an independent entity rather than the firm itself.
The Finance Ministry reports that the state debt increased by 155 billion crowns in 2011 to slightly less than 1.5 trillion, which means about 142,000 crowns (6,814 USD) per Czech citizen. The current figure is currently four times the amount of ten years ago and doubled in the last six years. According to the strategy for debt management and financing, the national debt should have been four billion crowns lower last year and should increase by 103 billion in the next year.
The unemployment rate in the Czech Republic jumped by more than half a percentage point in December to 8.6%, the highest rate since April of last year. The number of registered job-seekers also crossed the half-million mark to 508,451, according to information from the Ministry of Labour. Analysts contacted by the Czech Press Agency put the increase down to seasonal factors but estimate further rises in unemployment numbers over the coming months, as concerns over the fate of the eurozone continue on the financial markets.
More than 500,000 Czechs are currently out of work, with the rate of unemployment growing from 8 percent in November of last year to 8.6 percent in December. While a jump in unemployment figures is not unusual for this season, experts warn that the growing number of persons aged 50 and over who find themselves out of a job and with little chance of getting hired poses a serious long-term problem for the economy. Former finance minister and Raiffeisenbank’s chief economist Pavel Mertlík speaks about expected labor market developments for 2012.
Czech Prime Minister Petr Nečas, in a Sunday TV appearance, defended his government’s reform policies, stating that he opposition’s criticism of them is unjustified. The opposition Social Democrats had ample time to weigh in on the reforms; their recent challenge of the reform package in the Constitutional Court is merely an attempt to block the lower house’s work for several months, he said. He added that the changes in unemployment legislation had created a system that motivates persons without work to seek employment, citing figures that put the Czech Republic at the sixth-lowest unemployment rank within the EU. Mr. Nečas said that in the future, the country needed to further invest into research and innovation to remain competitive.
In this week’s business news: An increase of the lower category VAT has gone into effect, Czech online discount sites see steep increases in sales, hard liquor consumption is on the decline, Škoda Auto has sold a record number of cars in 2011, and the Czech Agriculture and Food Inspection Authority says that 15 percent of food products it inspected in 2011 failed to meet its quality standards.
Up to 40 percent of Czech will live from pay day to pay day, creating no financial reserves from their salaries, suggests a new survey by the Ipsos Tambor agency released on Monday. Some 21 percent of people who took part in the poll said they considered their financial situation to be good, while 13 percent said they planned to save and invest. 8 percent of those polled said they would like to pay off their debts this year.
No sharp increase has been registered in the prices of foodstuffs due to a higher VAT rate that came into force on January 1, the news agency ČTK reported on Monday. The lower VAT rate increased from 10 to 14 percent; however, most supermarket chains raised their prices gradually in the last weeks of 2011 to avoid a sharp increase in January. The head of the Czech Trade and Tourism Confederation said Czech retailers used a similar marketing strategy as their colleagues in Germany when the country adopted the euro.
The Czech economy will most likely contract by up to 2 percent in 2012, Finance Minister Miroslav Kalousek told Czech Radio on Monday. This would mean the state budget would lose between 30 and 50 billion crowns; however, the budget’s deficit would still remain at 105 billion crowns, or 3.2 percent of the country’s GDP. Mr Kalousek said regardless of the possible contraction, the government would pursue its fiscal strategy aimed at gradually lowering the deficit of the state budget. By 2014, the deficit should drop to 1.9 percent of the GDP.
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