In Business News this week: the government approves a far-reaching fiscal consolidation plan to reduce the state budget deficit, a drop in deliveries of Russian crude oil to the Czech Republic triggers speculation of a plan to up the price and Škoda Auto posts record sales.
Government approves austerity package
The government this week approved a package of far-reaching austerity measures intended to bring the gap in public finances to below 3 percent of GDP in 2013 and down to 1,9 in 2014.The measures combine tax hikes and cuts in public spending that will affect all strata of society. Both VAT rates are to rise by 1 percent in 2013 to 15 and 21 percent respectively. The hike is expected to raise inflation by 0.7 percent. Higher taxes are to be levied on cigarettes, energy and earnings in tax havens. Individual income tax will rise from 15 to 20 percent. For a period of three years, those with monthly salaries over 100,000 crowns will pay an additional 7-percent “solidarity tax” on the exceeding amount made. The state will pay lower social benefits, there will be fewer tax reliefs for entrepreneurs and pensions will grow at a significantly slower pace than formerly envisaged. Although the move is expected to affect each and every household in the country analysts agree that pensioners will be the hardest hit.
Government issues revised macro-economic forecast
According to a macroeconomic forecast published this week, the Czech Finance Ministry still expects a 0.2 percent growth of the economy this year, but has lowered its estimate for 2013 from a previous 1.6 to 1.3 percent. The revised growth prediction is linked to the announced austerity measures and low consumer confidence in the economy. The ministry expects inflation at 3.3 percent this year and 2.3 percent in 2013. It predicts a slower growth of the average nominal wage in the upcoming period – citing a nominal wage growth of 2 percent this year. In view of projected inflation this would mean a 1.3 percent fall in real wages. Given the higher growth forecast for 2013 the ministry expects a pay rise of 2.6 percent in nominal terms, which would amount to a real wage increase of 0.3 percent.
Unemployment down in March slightly thanks to good weather
Unemployment in the Czech Republic fell by 0.3% to 8.9% in March after four months of steady increases. Analysts ascribe the drop to early seasonal work allowed by the good weather, but say the situation on the labour market overall remains poor and agree that no significant improvement can be expected in the immediate future due to expected lay-offs in the public sector. The number of vacancies is reported to be around 39,000, meaning there are on average 13 jobless people per vacancy.
Confusion over drop in deliveries of Russian crude oil
The Czech Trade and Industry Ministry has dismissed fears of a shortage of crude oil following reports early this week that Russia’s Transneft would ship only 80,000 tons of oil to the Czech Republic this month, rather than the 409,000 tons originally scheduled. A Transneft spokesman said the shortfall was caused by technical problems after Russian oil companies failed to submit new requests for deliveries to Czech customers. Two days later, the company said it was ready to deliver 230, 000 tons of oil to the Czech Republic in April, still just over half of the required amount. While the Czech Industry Ministry said the situation was not critical, since the country had reserves of oil and oil products for more than 90 days, the news has given rise to speculation that the shortfall could be a ploy to raise the price of Russian crude oil for the whole region. A dramatic drop in deliveries from Russia via the Družba pipeline would force the Czech Republic to increase the purchase of more expensive oil from Mediterranean ports via the IKL pipeline.
Škoda posts record sales
Škoda Auto, the Czech unit of the German car giant Volkswagen, has set another all-time high in March posting a 12.1 percent jump in global sales to a record 95,200 units. The surge was driven mainly by sales in China and India where Škoda registered a 65 percent growth in sales figures. Despite intense competition in Western Europe, the company increased sales marginally by one per cent, selling almost 41,500 cars. In March, Škoda’s most popular models in Western Europe were the Fabia and the Octavia, while the Yeti and the Roomster achieved the highest growth rates, posting 10.3 per cent and 4.7 per cent respectively. The Superb also performed strongly, rising by 3.3 per cent.