In this week’s Business News: the Czech recession lingers; government receipts fall as the economy bites; the NGO Social Watch issues a damning report of government economic policies; a new study finds that Czechs favour large supermarkets; Česká Pojišťovna manages to stay profitable despite tough times and the Czech postal service announces an IT tender as the organisation expands its services.
Czech recession lingers
A new preliminary estimate of GDP growth in the second quarter released by the Czech Statistics Office shows that the Czech Republic remains in recession. According to the numbers, the Czech economy shrank by 1.2% year on year and 0.2% against the previous quarter. This is the Czech Republic’s third straight quarterly GDP decline, with analysts expecting the country’s economy to contract by a full percent over 2012. The Czech government anticipates recovery to begin in late 2012 and early 2013, but with more and more European countries - such as Hungary, Bulgaria and Romania – experiencing stagnation, fears are growing of a prolonged period of economic woes.
Government receipts fall as economy bites
And staying on the subject of the Czech economy, the recession is also leading to a decline in tax receipts for the government leading to a major crunch in department budgets for 2013. According to the Czech daily Právo, declines in manufacturing and construction as well as ever decreasing purchasing power from ordinary Czech families has led to smaller than forecast tax receipts for the government. Its 2013 forecast is for 992.2 billion crowns in revenues and 1092.2 billion crowns in spending, meaning a 100 billion crown deficit. This forecast factors in the controversial and as-yet still not passed increases in VAT from 15 to 21 percent. The government is anticipating this will lead to higher revenues – others, including the opposition, believe that higher VAT rates will conversely harm economic growth and further decline the government’s receipts. Finance Minister Miroslav Kalousek is on record as wanting a no more than 100 billion crown budget deficit in 2013 – whether this promise can be kept will no doubt provide much fodder for politicians and economists in the coming months.
Social Watch issues damning report of government economic policies
Meanwhile, the global NGO Social Watch has issued a report highly critical of the Czech government’s economic policies. According to the organization, whose stated mission includes fighting for poverty eradication, the government is pursuing a “neo-liberal” economic model, which, it argues, is undermining social wellbeing, impoverishing the middle class and low income groups and increasing unemployment. The organization also singled out the country for corruption, tax avoidance of around 190 billion crowns annually and lack of equal opportunities. Social Watch, which has existed since 1995, did not hold back in its harsh words for the Czech government’s handling of the economy, calling current measures “incompetent” and short-sighted as well as warning that the country, with its heavy reliance on exports, was becoming increasingly reliant on the health of its neighbours.
Study finds Czechs favour large supermarkets
A new study by the retail monitoring company Incoma GfK has found that the Czech Republic currently houses 282 hypermarkets, 645 supermarkets and 630 discount stores on its territory. Additionally, it found that hypermarkets were the most popular among Czechs with 45 percent of households spending most of their money on groceries in this large type of store. Meanwhile, around a quarter spent their money in supermarkets, 18 percent in discount stores and only 13 percent in smaller grocery outlets. According to Gfk, accessibility, choice and price all combine as factors in the choices made by Czech shoppers. Around 80 percent of respondents surveyed stated that the current poor state of the Czech economy was influencing their shopping habits, while a growth from 42 percent last year to 53 percent this year was evidenced in respondents stating that locally grown Czech produce was a crucial factor in their shopping decisions.
Česká Pojišťovna manages to stay profitable despite tough times
Česká Pojišťovna, the largest insurance company in the Czech Republic, has announced a sharp fall in profits, down 916 million in the first half of 2012, and standing at two billion crowns. Insurance revenues during this period were 16.4 billion crowns, down 2 percent year on year. The Czech insurance market has witnessed an overall decline in recent months and Česká Pojišťovna has stated that the fact that it was able to be profitable at all was down to the implementation of an austerity and re-structuring strategy which significantly slowed down a six percent fall in revenues the previous year.
Czech postal service announces IT tender in expansion of its services
Česká Pošta, the Czech postal service, has issued a major tender for IT services for 900 million crowns. According to the news website e15.cz, the contract will be for four years and involve the operation of the postal service’s SAP system software, through which much of the operations of Česká Pošta are processed. The move comes in the wake of announcements by the government this spring enabling the expansion of the postal service to include the provision of public administration IT services. This, e15 reports, may include The State Agricultural Intervention Fund, which administers farming subsidies issued both by the Czech state and the EU.