Experts expect Czech export will grow at slower pace in 2018

Exports of Czech companies will continue growing next year, however, the pace should slow down to 3-5 percent, being hampered mainly by a drop in the demand for cars in Europe, according to a CTK poll among analysts and business associations.

Exporters can adjust to gradual firming of the Czech crown by increasing productivity, while the crown's strengthening beyond Kc24.50/EUR could pose a problem for them, the survey revealed. Conditions for the Czech export will still be positive in 2018 thanks to the economic growth in the euro area.

"However, we expect that the European demand for cars will start falling gradually during the year, likely reaching saturation point after four years of a continuous rise," UniCredit Bank analyst Jiri Pour said.

The car segment makes up a third of the Czech export
The Confederation of Industry does not expect the export structure to change significantly. "Czech exports will continue to be driven by vehicles, engineering, and consumer goods, for example," the Confederation of Industry vice-president Radek Spicar said. Czech companies start to export services; and exports of complete plants in the energy industry, and arms exports to new destinations especially outside the EU can play a major role, Spicar said.

Deloitte company chief economist David Marek expects a 3.1 percent growth in exports in 2018. The deceleration should be caused by the foreign demand rising more slowly, and a stronger exchange rate of the crown, Marek said.

The crown's gains can impact two types of companies - those operating with minimum profit margins as subcontractors of subcontractors, and those who do not hedge against currency swings, Petr Dufek of CSOB said. Czech companies have an exceptional competitive position against Western Europe in terms of low wage costs, Dufek added.

It is important how quickly the crown will strengthen. Exporters can dynamically adjust to gradual firming which represents a natural sign of the Czech economic convergence. The crown's strengthening would not have its more significant impacts on Czech exports sooner than in 2019 thanks to most exporters safeguarding against currency swings in 2018, Pour said.

The Chamber of Commerce expects the crown's exchange rate vis-a-vis the euro to reach Kc25.40/EUR on average at the end of next year.

The Czech Republic entering the euro area would be a long-term solution to exchange rate problems, Spicar said.

Source: CTK

Tereza Řezníčková
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section Aktuálně
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