Czech GDP fell 1 percent in both year-on-year terms

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The Prague Post | 23.5.2012 | Rubrika: Business | Strana: 9 | autor: EMILY THOMPSON |

First-quarter economic results juxtapose Czech 'shallow recession' with Slovak 'bright future'
Slovaks have been outperforming Czechs both on and off the ice hockey rink, with the Slovaks claiming the win over their Western neighbors in the world championship just days after preliminary data showed Slovak first quarter GDP growth far outshined the Czech contraction of a full 1 percent
Czech GDP fell 1 percent in both year-on-year terms and compared with the previous quarter, according to preliminary estimates from the Czech Statistical Office (CSU). Meanwhile, estimates from the Slovak Statistical Office show Slovak GDP grew 3.2 percent year on year and 0.8 percent quarter on quarter. Though the Slovak regions of Czechoslovakia when united were historically less developed than the Czech lands, giving the Slovaks more room for growth, economists say recent policy deviations have led to the difference in economic performance.
"Uncertainty is the most-used word today," said Bohuslav Cizek, an analyst with the Confederation of Industry of the Czech Republic. "Most companies will postpone investment."
Though some analysts say the final data may be revised slightly, the general negative trend will likely remain unchanged, pushing the Czech Republic further into what Cizek called a "shallow recession."
CSU researchers said financial and insurance sectors were especially hard hit in the first quarter, as was construction. Tobacco sales slumped in the first quarter after consumers stockpiled in late 2011 in the run-up to an additional excise tax on tobacco products that took effect from the first of this year.
Until recently, the Czech austerityminded government pushed deficit reduction and management of public finances as its main economic priorities, but Cizek said industry wants to see pro-growth measures implemented.

“What we want is for the government to take into consideration when implementing austerity measures or changing taxes that they should combine it with an export strategy and competitiveness strategy,“ Čížek said.
Prime Minister Petr Nečas has begun to talk stimulus in recent weeks after it became clear elections in Greece and France would likely see the triumph of anti-austerity candidates.
He told guests at a Civic Democrat party conference April 28 that the government’s primary goal - balanced budgets - cannot be attained without a growing economy.
Nečas mentioned several areas of pro-growth investment, including diversification of exports to countries outside the EU, shortening the time it takes to get permits for major construction projects and education for small businesses wanting to export.
The Slovaks, on the other hand, have been experiencing solid economic growth, based mostly on exports, especially of automobiles, and the services sector has seen an uptick as well.
“In terms of GDP per capita, Slovakia is not only very close behind the Czech Republic, but also Germany,“ said Martin Prokop, an analyst with Next Finance. “In comparison with the Czech Republic, Slovakia can offer better conditions for conducting business in the country. Preliminary indicators are now reporting a bright future for Slovakia.“
But even if some might see a bright future in the economic indicators, it doesn’t mean much to the throngs of unemployed; Slovakia’s April unemployment rate was 13.4 percent.
“In general, Slovakia has a longstanding problem with structural unemployment. Even during peak growth in the fourth quarter of 2008, the unemployment rate was relatively high at 8.7 percent,“ said Martin Filko, head of research at the Slovak Finance Ministry. “The economic growth of 3 percent coupled with fiscal consolidation was not sufficient to have significant impact on the unemployment rate.“
Filko added that cuts to publicsector jobs and state-owned companies over the past few years have also negatively impacted unemployment figures.
Slovakia, much like the Czech Republic, would have been vulnerable to a drop in demand for its exports with or without the adoption of the euro, Filko said, but he conceded the “recent risk premium associated with the sovereign debt crises has negatively affected Slovakia.“
Slovakia’s 2012 budget also focuses on two basic priorities, Filko says: transport infrastructure, like the construction and modernization in order to facilitate interconnections with the European transport network and make all Slovak regions more accessible, and education, especially to increase the volume of funds per student in the regional education system.
The ČSÚ will release the official national figures for the first quarter of the year June 8.