In Business News this week: a surprise rate cut from the national bank; Škoda Auto sees encouraging November sales; Prague drops down list of choice business locations; auctions bring reality to real estate market; and finance ministry bids for a stake in poker proceeds.
The Czech National Bank surprised everyone this week with a quarter of a percentage point rate cut. The move brings its main interest rate to an historical low of 1.0 percent. The bank said that inflation was unlikely to stray far from its target of around 2.0 percent in the near future. It added that industrial and farm prices actually fell back in November. The bank expects the Czech economy to bounce back in 2010 with growth of 1.4 percent after shrinking by 4.4 percent this year.
The country’s biggest car producer, Škoda Auto, says November car sales were 26 percent higher than in 2008 with 55,460 vehicles shifted from show rooms. Sales in the Czech Republic were up 10.6 percent. The figures give some comfort with a dramatic fall in sales feared in Europe with the ending of many government scrap incentives to trade in old cars for new. Škoda Auto expects overall car sales this year to reach the record levels of 2008 of around 675,000. The problem is that car prices have often been slashed, so revenues are down.
Prague is the 68th most promising business location in Europe according to an analysis carried out by the German consultancy Contor. This represents a slip of 27 places since Prague’s previous ranking at 41 in 2007.
The capital city is the only Czech location in the top 100. Luxembourg is placed first, followed by the German cities of Munich and Ingolstadt. Warsaw came in fourth, the Slovak town of Trnava in 10th place and Slovak capital Bratislava 22nd. The survey ranked locations according to their purchasing power, number of university graduates, spending on research and demographic outlook.
Czech construction companies have discovered a new tool to offload newly built flats and houses: auctions. The first major auction took place this week with 39 flats and houses in and around Prague coming under the hammer. Minimum bids were 40 percent of the catalogue estimates.
But the bidding gave a clear signal that these estimates were too high and that asking prices in Prague and perhaps the rest of the country are over inflated. For example, flats in one Prague development were auctioned for a third less than the construction company had targeted. The auctioneers say the event injected a bit of reality into the market though it is perhaps doubtful that this was what the developers were looking for.
The Czech Ministry of Finance this week showed its hand with regard to its desire to tax poker and other card games. The ministry has said that it wants to close a loophole under the current law by which poker is not regarded as a game of chance. As a result, an estimated 1 billion crowns in bets is not being taxed in any way. Poker, along with other card games, are enjoying a boom in the Czech Republic with 135 organisations employing the word registered with the interior ministry at the end of November.
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