Czech industrial output rose a weaker than expected 4.8 percent year-on-year in July, slowing down 0.9 percent on the previous month. The Czech Statistics Office attributed the slowdown to a weak business environment in the EU, which takes the lion's share of Czech exports.
The European Bank for Reconstruction and Development (EBRD) has urged the Czech government to speed up privatisation of the remaining state-owned companies. Directors of the bank, which has poured nearly a billion dollars into Czech projects since the fall of communism 14 years ago, re-emphasized the goal for the transition country this week during their biennial visit to Prague. The Czech government's multibillion-dollar portfolio contains giant chemical works, the largest power utility, the nation's dominant telecommunications company, coal mines, an airline, and other firms. Privatization of these companies has slowed or been postponed due to market conditions, politics or a lack of serious bidders. The EBRD sees privatization as a key to improving the country's industrial competitiveness and attracting more private investment.
The unemployment rate in the Czech Republic increased to 10 percent at the end of August, according to the Labour and Social Affairs Ministry. Over 524,000 people are out of work. Traditionally, the highest unemployment rate was reported in the districts of Most, North Bohemia - 22.9 percent, and Karvina, North Moravia - 20.4 percent. Unemployment in the Czech capital Prague has reached 4 percent. Analysts say the main reasons for the unemployment growth are high wages as a result of trade union pressure, which result in companies laying off employees and high corporate taxes which restrict the investment of profits into expansion and new job opportunities.
The Czech Statistics Office said on Monday that year-on-year gross domestic product (GDP) growth in the second quarter slowed down to 2.1 percent from a revised 2.4 percent in the first quarter. It is the weakest year-on- year performance among the four largest central European countries which will join the European Union next May. In its report, the Statistics Office also said consumer prices dropped by 0.2 percent month-on-month in August thanks to cheaper food, clothing and household equipment. The Czech Republic has slashed interest rates to all-time lows of two percent to help boost the economy in a low inflation environment. The Central Bank expects gradual revival of inflation in the coming months and most analysts have forecast no more rate cuts.
The Czech central bank said on Friday it would harmonise interest rates on all accounts commercial banks hold at the bank after a change in some rules for creating minimum reserves takes effect on November 6th. Banks' cash accounts at the Czech National Bank bear interest 0.5 percent but after the change, the central bank will start paying interest equal to the two-week repo rate which has stood at an all-time low of 2 percent. The Central bank said the cash accounts would also be newly taken into account for calculating the banks' minimum reserve requirements, along with the bank's clearing accounts.
The express courier DHL, a unit of Germany's Deutsche Post, will invest tens of millions of dollars to build a pan-European information technology centre in the Czech Republic. DHL said it would move most of its IT operations from Britain and Switzerland to the Czech Republic, initially creating 500 new jobs. The total amount of investment is expected to be in the order of billions of crowns. The company chose the Czech Republic for its availability of a skilled and flexible labour force, well established and reliable telecommunications networks, good air links as well as for the optimum incentives package offered by the government.
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