Czech exports reached a record 3.9 trillion crowns in 2015, an increase of 7.2 percent year on year. Although exports to Russia dropped by over 30 percent higher exports to the county’s traditional EU partners made up for the difference. I asked the chief economist of Era Poštovní Spořitelna, Jan Bureš about the driving force behind the increase and its sustainability.
“Czech export was supported mainly by the good performance of Czech manufacturing, especially the car industry which is becoming more and more competitive in the European context. Besides that, of course, Czech exporters benefitted very much from the good performance of our main trading partners, especially Germany and other countries in the Eurozone. Looking at the good performance of the overall trade balance it is worth mentioning as well that we benefitted from lower oil prices that helped to cut our overall import and therefore the trade balance looks even better than it would otherwise.”
There is also the impact of the weak crown. Is this growth sustainable long–term?
“Of course Czech exporters also benefitted from the weak crown and especially from the stability of the exchange rate – that is something that is important for Czech exporters, that they do not have to manage the exchange rate risk on a daily basis and they can be pretty comfortable with a relatively low-volatile crown. Nevertheless, I do not believe this is the main factor behind the success of Czech exporters and I am pretty confident that Czech exporters would be able to withstand a stronger crown even now. Looking ahead there is probably no reason to worry since the central bank promised to keep the forex intervention regime in place for the entire year. In 2017 we will see, but I believe that a relatively reasonable strengthening of the crown would not hurt Czech exporters significantly.”
Over 83 percent of exports are destined for the EU, which means that efforts to diversify have not been very successful. Do you see this as a major problem at this point?
“I believe that the orientation to the West European market is not a disadvantage. It is quite natural as we are a rather small economy, extremely open, and some products that go to West European markets do not necessarily end up there but outside Europe. Broadly speaking, I do not see this as a problem also because West European markets are much more stable, that is true especially these days when we see that the major risks for the global economy are coming from emerging markets especially from Asia and South America, so our focus on Western Europe can I think actually be an advantage these days.”