12-06-2003

Capital market stays calm ahead of Czech EU referendum

The market jitters seen in many East European countries ahead of referendums on EU membership are unlikely to hit the Czech Republic before this weekend's vote, which will likely confirm the country's accession. Referendums in some candidate countries, such as Poland and Slovakia, have left investors' nerves frayed due to minimum turnout requirements that some feared would not be met - and barely were. But the Czechs, who vote on June 13-14, have no threshold and thus can approve EU entry with a simple majority, even if only a small fraction of the population votes. With opinion polls consistently putting Czech support at well over 70 percent, analysts said financial markets have already priced in a successful referendum.

GDP grows faster than expected

Czech gross domestic product rose a higher than expected 2.2 percent in the first quarter as the economy continued to defy expectations of a slowdown due to sluggish demand in key West European export markets. According to the Czech Statistics Office, strong domestic demand and a rise in wages picked up the slack in the economy as Czechs slaked their thirst for consumer goods, much of it on credit amid record low interest rates. Analysts had expected a 1.77 percent rise in GDP for the first quarter. Fourth quarter 2002 GDP rose a real 1.5 percent.

CPI stays flat

Czech consumer prices were unchanged in May both in month-on-month and year-on-year comparisons, matching analysts' forecasts. The Czech Statistics Office said that food prices, the main inflation item, dropped 4.3 percent year-on-year, but saw a 0.5 percent month-on-month rise.

The Czech National Bank said that the inflation data deviated slightly from its long-term forecasts released in April. The Central Bank said the Czech economy remains on a low inflationary path with the expectation of seasonable jumps in food prices, to be offset by the development of crude oil prices and the appreciation of the crown to the dollar.

Jobless rate continues to fall

The Czech Republic's unemployment rate dipped to 9.4 percent of the workforce at the end of May from 9.6 percent in April, the Labour Ministry reported. The figure is in line with analysts' expectations.

New energy policy draft: coal and atom

The Czech Republic will look to increase its dependence on coal and nuclear power for its energy needs. A draft strategy for the period to 2030, presented by the Industry Ministry, also suggests the country should do as much as it can to limit its future dependence on imports of energy resources. Energy from coal currently accounts for two-thirds of the country's consumption, but coal reserves have been running out. Increasing dependency on nuclear energy is therefore seen as the most acceptable scenario.

Dominant fixed-line operator acquires mobile leader

The dominant Czech fixed-line telecommunications operator, Czech Telecom, has purchased 49 percent in Czech mobile leader Eurotel from AT&T Wireless and Verizon Communications, for just over 1 billion USD. Telecom said the mobile operator would first pay dividends of 415 million USD, so the lower than expected price reflects this reduced value in the company.

Cesky Telecom to expand abroad

Czech Telecom said it would start providing wholesale voice and data services in neighbouring Germany, expanding its Central European coverage. The company said in a statement that its fully-digital telecoms network has access points in Frankfurt, as well as the Austrian capital Vienna and the Slovak capital Bratislava. It added it wants to become an alternative to existing Frankfurt-Vienna traffic links with the ambition of further penetrating Southeastern Europe.

12-06-2003