Survey shows growing purchasing power gap between Bohemia and Moravia

13-09-2005

The average Czech has more pocket money than his or her neighbours in fellow post-communist countries like Poland, Slovakia, and Hungary. But according to a new survey out this week, there is a growing East-West divide within the Czech Republic itself, and concern that a "two-speed" economy is developing.

The average resident of the Czech capital, Prague, has a parity purchasing power one-third greater than the national average - that is to say, for every dollar that John Q Public, or rather Jan Novak, has in his pocket, your average Praguer probably has another thirty-three cents to spend.

According to a purchasing-power analysis released on Tuesday by the market research companies GfK Praha and Incoma Research, the man on the street in Bruntal, a Moravian town near the border with Poland, has perhaps half the disposable income of his Prague counterpart.

Incoma Research managing partner Tomas Drtina says such city-by-city comparisons are crucial for retailers in deciding which goods to place on the shelves in specific outlets:

BruntalBruntal "It does not mean that the situation of the person in Bruntal is 'twice as bad' as for the person living in Prague. There are, of course, some things that the person in Bruntal cannot afford to buy; but for instance, they won't spend as much on their dwelling [rent]. But there will always be some costs which are the same in all regions, so it's natural that you cannot expect to have as high revenues from your north Moravian store as you do in Prague."

In other words, while parity purchasing power doesn't necessarily translate into a higher quality of life, it is a major factor in determining where a retailer like Tesco or Carrefour will choose to locate, and what product line it will carry. And so areas like Bruntal --with high unemployment and a purchasing-power that is 70 percent of the national average -- don't benefit from the positive knock-on affects that such businesses can bring.

It also means that in Moravia, people may have a harder time paying for small luxuries such as a night out at the movies or a high-speed Internet connection.

Incoma has been carrying out purchasing-power analyses in the Czech Republic since 1995. Mr Drtina says that generally speaking, the disparity between Moravia in the East and Bohemia in the West has been growing slowly but steadily over the past decade.

Drtina: "It's important for retailers to estimate the potential spending [habits] of people living in these areas. It's also important for the government, I think, because state institutions can see where they may expect some economic problems. But most of the clients [buying such research] are private companies."

The GfK-Incoma research confirms that Prague is the richest "region" in the country. It also shows that every single region with a purchasing-power higher-than the national average is in Bohemia; namely Prague, Pilsen, Karlovy Vary and Cheb, which have attracted the bulk of foreign direct investment.

By way of regional comparison, the Czech Republic on the whole has a parity purchasing power that is 66 percent the level of the older European Union member states, Hungary 59 percent, Slovakia 49 percent and Poland 45 percent.

13-09-2005