In Business News this week: the economy slows down suggesting even bleaker outlooks; the Czech crown loses its lustre for investors; Czech banks lose billions in the Greek debt crisis; President Klaus vetoes a bill introducing criminal liability for corporations; firms increasingly introduce loyalty programmes to keep customers; and Czech Post will launch “great parcel revolution”.
Czech GDP growth slowed down to an annual 1.5 percent in the third quarter of this year, according to preliminary figures by the Czech Statistical Office released this week. Compared to the previous quarter the economy contracted by 0.7 percent and the outlook for the rest of 2011 and 2012 is even bleaker: on Friday, the OECD predicted 1.6 percent growth for the Czech economy next year – down by 0.5 percent from its previous estimate. But that’s still optimistic compared to the Czech National Bank’s estimate of 1.2 percent and very cautious forecast by the country’s Finance Ministry which said a 1.0 percent growth next year would be a success. How things develop, however, will very much depend on Germany where the vast majority of Czech exports are destined.
The volatile Czech currency has lost its appeal for investors looking for a safe haven, according to a report by the Financial Times which noticed the crown’s 2.5 percent fall against the euro over a period of five days. Along with other currencies of Central and Eastern Europe, the crown took a severe beating due to actions of neighbouring central banks, the paper says. Until recently, investors were borrowing in the relatively low-yielding crown to invest in other currencies. But then the Polish and Hungarian central banks defended their currencies, and made the crown much less attractive. The Czech Republic is, however, expected to keep its currency weak, mainly because of the importance of exports to the country.
Since the start of the Greek and later, the Eurozone debt crisis, Czech banks have been considered to be in healthy conditions, particularly in comparison with some of the banks in Western Europe. But it turns out that some banks in the Czech Republic lost billions in Greek state bonds as well. Komerční banka had to write off Greek bonds worth more than four billion crowns while the ČSOB and UniCredit banks lost each over two billion. While this has had no serious impact on the banks’ overall condition, analysts warn that should the crisis also fully hit Italy, the situation is likely to get worse: Komerční banka holds Italian bonds worth another 8.3 billion crowns and ČSOB would lose 1.8 billion crowns.
President Václav Klaus on Friday vetoed a bill introducing criminal liability for firms. The Czech centre-right government considers the bill an important tool in curbing corruption. But Mr Klaus said the legislation ignores the link between the crime and its perpetrators, and is an example of shirking responsibility, adding that the bill was part of a fashionable trend to criminalize corporations. Justice Minister Jiří Pospíšil rejected Mr Klaus’ claims, and said he hoped coalition MPs will overturn the presidential veto when the bill returns to Parliament. The Czech Republic is the only EU member state without such legislation.
Czech firms are finding it harder and harder to keep their customers, and the country has seen a boom in all kinds of loyalty programmes, according to a survey by the Retail Adventures agency released this week. Rewards such as mobile phone credits, short trips and various kitchen appliances have been mostly offered by banks and other financial institutions but these are increasingly joined by gas stations, clothes makers and supermarkets. The agency said that this year, 20 percent more firms have expressed interest in introducing loyalty programmes for their clients while an 80 percent surge has been recorded compared to the period before the financial crisis.
In January 2012, Czech Post will introduce what has been dubbed as a “great parcel revolution”, the daily Hospodářské noviny reported on Friday. The state-run firm will overhaul its package delivery services in a reaction to competition by the private sector, introducing four types of parcels: those to be picked up at post offices and those delivered to addressees’ homes, along with express and oversized parcels. In January, Czech Post will also introduce corresponding new prices. The firm has not commented on the report as it is going to launch an official marketing campaign next week.