The Czech Republic’s longest recession on record has come to an end. According to preliminary figures released by the Czech Statistics Office on Wednesday, the economy grew by 0.7 percent in the second quarter of the year – the first growth recorded after six straight quarters of contraction. The upturn has largely been driven by exports, which increased by 1.4 percent in the April to June period.
The S-Card project for electronic social benefits payments, which has so far cost the Czech state 82.54 million crowns, will cost more than five million crowns to close down, Labor Minister František Koníček said at a press conference on Tuesday. The S-Card system will be terminated gradually until through the end of next March. The more than 270,000 current holders of the S-Card will be offered to receive social benefits payments either through the post office or by transfer to their bank accounts. The project was spearheaded by the former labor minister Jaromír Drábek, who was hoping to save the ministry money on distribution of benefits, though the plan was highly criticized by politicians and the public. Last week, the lower house approved a bill that terminates the project.
The cost of outsourcing services in some Czech ministries has increased by up to 90 percent in the past two years, the Supreme Audit Office reports. An audit into the finances of the trade, environment and regional development ministries has revealed a significant increase in the use of outsourcing in all three institutions. The Audit Office says that in many cases ministries paid agencies millions of crowns to do work that should rightly have been done by ministry employees. This includes drafting bills and preparing tenders for which the ministries have teams of specialists in respective departments.
Economists suggest the longest recession in modern Czech history may be over. The results of the second quarter, which are to be officially announced on Wednesday, reportedly indicate a GDP growth of 0.6 percent quarter-on-quarter. In the first quarter of this year the economy contracted by 1.3 percent Q/Q, the steepest drop since the recession started. According to analysts the recession, which lasted for six straight quarters, is over but the economy may continue to feel the after-effects for another 18 months.
The Czech central bank on Friday released an improved estimate of the state budget deficit. It now predicts the deficit will reach 2.3 percent of the country’s GDP, down from its previous estimate of 2.4 percent. The Finance Ministry expects this year’s deficit to reach 2.8 percent. Next year, the Czech National Bank forecasts a further decrease of the deficit to 2.0 percent of GDP.
This week in Business News: Consumer prices dropped in June, along with inflation rate; Study shows that many key sectors still have very few women in management; Construction and industrial output down in June; New tougher regulations on alcohol distribution go through lower house; Businesses would mostly welcome early elections in hopes of a more stable political and economic situation.
The lower house on Thursday passed legislation put forward by the Senate effectively nixing the controversial S-Card system which was to have streamlined the payment of social benefits for recipients. The system is expected to come to an end later this year; pensioners, welfare recipients or others will receive payments to their account or be able to cash in cheques at their local post office as was the case before. The legislation will now head to the upper house.
The hotly-anticipated trial of MP and former governor of Central Bohemia David Rath has begun at Prague’s Regional Court. Mr. Rath, who has been in custody for more than a year, faces charges of bribe-taking and manipulating public tenders. Outside the court, the one-time prominent Social Democrat handed out copies of a written statement saying he was innocent and would fight to the last. Mr. Rath and 10 other defendants, one of whom is a former MP, could face up to 12 years in jail if found guilty of the alleged corruption.
In one of its major decisions since assuming office in July, the Czech government has decided to end support for most renewable sources of energy. The draft legislation, triggered by relatively high electricity prices, would scrap state support for new solar and biogas plants as of 2014. It would also cap the subsidies paid by consumers in support of renewable energy sources.
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