In this week's Business News: new inflation and industrial production figures are released; the Czech postal service wins top marks in global efficacy test; unemployment climbs to 8.3%; Finance Ministry seeks to name and shame VAT avoiders; two supermarket chains fined hundreds of thousands for poor practices and foreign bidders seek D1 motorway contract.
New inflation and industrial production figures released
Inflation reduced its rate of growth in July, rising 3.1% year on year against a rise of 3.5% in June. The data from the Czech Statistics Office shows that groceries, non-alcoholic beverages, clothing and footwear prices all declined in July. The figure was lower than the forecast figure of 3.3% and underscores the impact of low consumer demand. However, with recent record temperatures causing extreme droughts and flooding in parts of the world, food prices are expected to see a dramatic increase at the end of September, particularly in cereals and oil-use products. Additionally, new Czech Statistics Office data showed the second straight month of decline in industrial production – down 2.4% in May and 2.2% in June; domestic orders were down 10.5%, while demand from abroad rose by 1.4%.
Czech postal service wins top marks in global efficacy test
The Czech Republic’s postal service is among four of the most efficient according to an unusual study carried out by a group of college professors and economists at the US’s Dartmouth College. In the test, the group sent letters to non-existent businesses at non-existent addresses in 159 countries and then waited an entire year to see which postal services returned the letters. Only four countries, Luxembourg, El Salvador, the United States and the Czech Republic returned all the letters back within 90 days – as stipulated by the code of the global Universal Postal Union. Meanwhile, sixteen countries, including Tajikistan, Cambodia, Russia and several nations in Africa, returned no letters. According to the architects of the study, the aim was to study the efficiencies and operations of government departments in which potential gain through corruption – stealing something from the letter, which in this case had no value - is eliminated as a factor.
Unemployment climbs to 8.3%
Unemployment rose in the Czech Republic in July to 8.3%, according to new data, with 485, 597 people looking for work, up by more than 11,000 against June. Also, according to the Labour Ministry, on average, there are now 12 people for every job opening in the country. The figures represent the first increase in unemployment numbers since a peak in February of 9.2%, after which unemployment figures began to decline. The Most region has the highest rates of unemployment – 15.8%, while Prague has the lowest – 4.3%. Unemployment for those aged between 20 and 24 stands at more than 15%, while for those aged 25 to 29, the figure is 8%. Youth unemployment is a major factor in the current EU economic crisis, standing at 55% in Macedonia, 46% in Spain and 44% in Greece.
Finance Ministry seeks to name and shame VAT avoiders
The Czech Finance Ministry is seeking to name and shame around 28,000 companies via new website listing those who owe the taxman unpaid VAT. According to figures cited by Hospodářské Noviny, the Czech state loses around 30 billion crowns annually on tax avoidance, around half of which is in the field of unpaid VAT. The new blacklist, which is set to begin operating next January, is designed to provide a disincentive for such avoidance as customers will presumably avoid companies publicly shamed for not paying their taxes. However, critics, including the Czech Chamber of Commerce, have criticized the plan saying the current definition for such avoidance is too vague and could lead to many companies being listed unfairly. The Czech Small and Medium Business Association has welcomed the intent of the move but also expressed concerns about the methodology. The law, which would enable Finance Minister Kalousek to establish the new system, is currently being debated in Parliament.
Two supermarkets fined hundreds of thousands for poor practices
Two of the Czech Republic’s largest supermarket chains, Tesco and Ahold, are to pay hundreds of thousands of crowns in fines levied by the country’s Czech Agriculture and Food Inspectorate Authority. Tesco has been fined the most, 750,000 crowns, while Ahold, which operates stores under the Albert name, has been fined 500,000. According to the inspectorate, the fines are an accumulation of numerous breaches of standards such as selling falsified, poor quality or re-labelled goods over the last year. Overall, the agency has levied over 7 million crowns worth of fines for improper practices this year alone. Findings including the relabelling of out-of-date over the counter foods are a common occurrence in both larger chains and smaller stores in the Czech Republic.
Foreign bidders seek D1 motorway contract
Eleven companies, including five foreign ones, have thus far entered the tender process for a 7.5 billion crown contract for the construction of a new stretch of the D1 motorway between Lipník nad Bečvou and Přerov. Construction on the roughly 14km stretch is expected to begin later this year, with a completion date of late 2015; it is one of only two sections of the 376 km motorway, which stretches from Prague to Ostrava via Brno, that has yet to be completed. The Turkish firm Mapa Insaat Ve Ticaret has entered the bidding process for the first time, as well as interestees from Spain and Portugal. According to analysts, such foreign bidding may help lower the costs of the Czech Republic’s hitherto notoriously overpriced road building projects. As noted by the newspaper Hospodářské Noviny, the Czech Republic thus far has no experience with road-building contracts with non-Czech companies.