Economics

Only a few hours after the Ministry of Finance officially announced the tender for the new owner of the Czech Airlines, the company everyone expects to take over the Airlines didn’t wait and applied for the privatization.

“Under the European convention Aeroflot, which doesn’t have the headquarters in Europe, buy maximally 49% share of CSA. Within the privatization of CSA it is our aim to join with those financial partners, which has the seat in the Czech Republic. In present, we negotiate with a few potential partners, with the seat in the Czech Republic, the outcome will be known in a few weeks.” said the general director of Aeroflot Valerij Okulov.

Applications can be send until 23rd March, the new owner will be known until September. The whole pack of state stocks, which is 91,51%, is being sold.

According to the investigation of Worldwide Holiday Costs Barometer, which was carried out by the British post company Post Office® Travel Services the Czech Republic is, after Hungary, the the second most cheap destination of 2009 for the British.

The common tourist costs in 27 countries of the world were investigated in the survey. The list include thinks like cup of coffee, bottle of beer, can of Coke, bottle of mineral water, tanning cream, repellent, box of cigarettes or a three-course dinner with wine in a local pub. The same list was more expensive in the Czech Republic, but only of £1,50. Thailand was third.

So it seems, the Czech Republic could be sought after by the British now even more than before. Not only the exchange rates and prices went positively for them, but the low-cost flight companies reduced prices as well.

The real estates in Prague cheapens. Buildings which are in worse shape, which most often means the ex-soviet blocks of flats are sold at three quarters of their price now. A flat with three rooms at Cerny Most cost 3,5 million czk, now real agents sell it about half a million cheaper.

Financial crisis, which stoke also the market with realities, distinctly changed the conditions at Prague realities market. If one wants to buy a flat on the suburbs or in at prefabricated housing, now there is a very good chance of getting a fine deal.

At the ‘good address’, however, the prices are not going down, quite on the contrary, parts of Prague like Vinohrady, Smichov, Brevnov, and the traditionally most expensive Old Town, Little Quarter and Hradcany are still rising prices. The quarters which are ‘cheaper’ now are Petrovice, Komorany, Jizni Mesto, Zahradni Mesto or Cerny Most. If you want a tip of location where the price is going to raise but is ok now, try Zizkov. Also, now newly foreigners can apply.

Fuels are at its minimum of the last four years, production cheapens automobiles, but taxis are still at those 28 czk for a kilometre. And it is not quite realistic to think it will get cheaper. Probably the whole year price is going to be the same as in January 2007, when gas was about 10 czk more expensive than now. Maybe a good news is that at least the Prague City Hall won’t allow the price to go higher.

Last year in summer, a litre of gas was 36 czk, today a litre of Natural 90 can be bought even under 21 czk. Even when there is the huge discount, it is not possible for the town hall to move the price.

Taxi drivers themselves are definitely not going to discount, as they ‘heal’ after last year season, when the City Hall promised to increase the fee to 32/km, but in the end it staid the same. Taxi drivers now feel the price is not only adequate, but low. You should choose of the companies, which won’t abuse you are not a Czech.

The Economist Jan Svejnar, who made himself visible at the beginning of the year especially by running for the Czech President, speaks about World Crisis in connection to the Czech Republic. He predicts that the recession is but coming to the Czech Republic and that the country can fight it even for a few years. Svejnar’s key solution is fast Euro acceptation and taxes lowering.

Svejnar says lowering of the laxes of physical companies would compensate by taxes in the fields of realities and consumption. That would help our competitive strength. Concerning Euro acceptation he definitely supports the asap method in 2012. The Euro would help hold the prices on lower level, so limiting pricing. The government should stimulate economic growth by higher investments to infrastructure. Source: LN

Fuels in Czech Republic keeps up with the trend of cheapening. In the last week the prices of diesel dropped more significantly than the prices of gas. Now, diesel costs 26,02 czk, and the most sold Natural 95 sells for 23,47 a litre.

“The price at gas stations have, with a delay, reacted on the rapid fall of gas prizes, which took place 14 days ago” the analyst of the company Colosseum Cermak stated.

Different situation was on markets last week. The black gold have, after a few week of weakening, directed upwards. The price grew by 14 percent. The growth was also made by weakening dollar.

The OPEC meeting planned on 17th December is expected to limit mining. It is expected that the countries exporting oil are going to accede to the most significant limitation of production in the last ten years.

The situation in the biggest Czech company becomes acute. Skoda Auto in Mlada Boleslav has to reduce the production again, it is stopped for November, now newly also for December. The pressure of finantial crisis and downturn of sales has obviously reflected on delivery time of the automobiles. Those have shortened form six weeks to ten-twelve days.

The employees have negotiated through unions 75% of wages during their unexpected holidays.

Why was Czech Skoda Auto stroke with the crisis? It kept the prices for cars incredibly high for Czech environment. It is nice to know Skodas sell well abroad, where are 5x higher salaries, but for Czechs they have been expensive for quite a long time. Even when they made them cheaper of sometimes 100.000 czk nowadays, it is not enough by far. Until Skoda realize it should be ordinary Czechs who buy Skoda cars, not Czech profiteers, the situation won’t change.

The foreigners wishing to buy a real estate for living will be able to do so freely from the next year in the Czech Republic. The law proposal by the Ministry of finance was accredited by the government.

The foreigners won’t be, however, able to buy agricultural land yet.

Still, the access to realities was much easier for citizens from member countries than for those outside the EU. For example citizens from other member countries didn’t have to found a corporate body, when they wanted to buy a property, from 2004.

The law change will bring, according to real estate agents, increased interest in local properties, especially among Eastern-European investors. Those will be interested in flats of especially middle and lower average standard.

And which nationalities buy flats in Prague? According to M&M reality, 50% are Slovaks. Second are with 35% Vietnamese, followed by Russians, Ukrainians and Netherlanders.

For many Czechs, who still enjoy lower prices of most of consume goods outside of the Czech Republic, it is a positive development, for many businesses it is a tragedy. The Czech Crown has strengthened again, returning under 24 czk/Euro yesterday. Returning to the price from the middle of September, before the news about bankrupting banks in the USA and stock markets bankrupts, after which the czk lost a lot from its value, almost to 26 czk/€.

If the yesterday course lasted, it would mean a trouble for Czech businesses. Many of them are already in crisis, some very important ones have already closed some of their factories, like the glass-works Czech Crystal.

Stock prices have grown rapidly, bringing along optimism for the financiers in the stock markets. But the main reason for strengthening of czk was different – the main reason was the Hungary save loan of 20 billions Euro, which helped to calm those, who were afraid of financial crisis in the middle Europe.

Of more than 5% in 2007 only. According to experts it is a result of many factors: people tend to think more about buying a flat, growing inflation together with economical optimism weakening after six years of growing.

Interest cool-off can be seen in market of brick flats as well, according to brokers quite a number of factors participate: “People tend to think more about buying a flat, inflation is growing and economical optimism weakens after six years of growth.” Cost of goods increase every year.

The main reason is price, which does not correspond to demand. Those, who would have money for overpriced prefabricated flat tend to choose other and more attractive housing. These, who can’t afford attractive housing, usually also can’t pay more than the real price.

Starting today, the 50-haler coins cease to be accepted in the Czech Republic. That means, the last haler coins are disappearing from our, Czech, reality.

In 18th century, when the so called First Republic was young, eight various haler coins were used – 2, 5, 10, 25 and 50 halers. When I was born in 1980’s, there were 10, 20 and 50 commonly used, 5 haler coin was already a rarity people carried for good luck.

Why we would stop using them? The official explanation is people quit using them. The National Bank is receiving back only a fraction of the coins. Originally, there were 50-haler coins worth 200 millions czk, from the total 350 billions of circulating money, so halers formed quite a minor part anyway.

Server Aktualne.cz brought information about decrease in tourist traffic, even when it is a slight one, it is the probable direction, due to very high prizes of everything in the Czech Republic. The number of overnight stays reached 9.7 million, which is 3.6 percent less than one year ago. Only three- and four-star hotels had more customers, which only points to the already mentioned – the Czech Republic became a country for rich tourists.

These data were provided by the Czech Statistical Office. Of course, the part which attracts the most tourists is the capital city. Prague had 1.2 million guests is 2.4 percent more than in the same period of the last year. Tourists from the CR represent only 11,1 percent of the Prague hotel guests. The nation which comes the most often is the Germans, but compered to the previous year, their numbers were 10,7 percent lower.

The smallest coin used in the Czech Republic is 50 haler. Until the end of August 2008. If you take a look into your wallet and find any of these, you can, and should spend them until September, as they are valid mean of payment for the last 18 days.

The Czech National Bank expects only 15-20% of the 50 halers coins to return. Most of the change people simply lost, some, they keep as a relic. Anyway, after 31st August, those coins are going to become about 410 tons of aluminium. That will officialy mean the end of haler in Czech currency. Logically, some 50 haler coins return later, they can be returned into any bank in the CR.

The paper 20 czk banknote also ends, but that is no news – there is so little number of them nowadays – I had the last one about three years ago.

Czech National Bank (CNB) used a whole arsenal against the strong currency. As the first came the announcement CNB decided to, first time in three years, lower the interest by a 0,25% to 3,5%. Immediately, the rate of exchange jumped up to 24,10 czk from 23,90czk/€.

Another punch to the Czech crown was delivered yesterday, when CNB announced there many be another lowering of interest until the end of the year, bringing further currency weakening.

The reason is exporters wouldn’t be able to export anything, if the crown continued strengthening. When the CZK got in July even under 23 czk/€, with the perspective of slowed state economics this was a logical solution.

Do you remember the times, when tourists came to Prague, spending only half of their budget, laughing; “Everything is soo cheap in Prague!” well, that times are gone. Now, it would be “You pay how much for that?! Well, that IS expensive.” Pricing of everything with combination of weakening dollar and Czech crown strengthening makes shopping more expensive for foreigners, at the same time, very low average salaries and pricing makes shopping expensive for Czechs as well.

When we found out, Skoda cars that are made in the Czech Republic are more expensive inland than abroad, it was clear there is something rotten. But it is not the only case – even the famous Czech beer is cheaper in Germany than in the Czech Republic, the biggest difference is in the area of foods. Things as butter are more expensive here than the rest of Europe by far. The famous Big Mac index demonstrates that meanwhile the burger is slightly more expensive here, an average USA worker at Mac Donald’s gets three time more money in salaries.

The famous burger and the governor of the Czech National Bank have a thing in common – they both demonstrate that the Czech currency is too strong. Meanwhile the second said that it will be necessary to lower the interest rates in August if the corona won’t stop strengthening, the first one simply demonstrates by its price something is not right.

The price of the burger in the USA is 3,57$, but a Czech BicMac costs 4,56$, a dollar more. An important thing to mention – in 2000 the price was half the price in the USA. The burger prices were 1:1, when the dollar sells for 18,50 czk, but right now the price is 15,39. That means the czk is overestimated towards the usd by 28%.

We have caught up with the US in the price, but salaries are a different thing. A new employee of the CR branch of Mac Donald’s earns 0,85 of Big Mac an hour, in the US it is for the same job 2,59 of the burger.

Lidove Noviny presented a study of a label proposal.

The European Union is, with high probability, going to entitle the Czech Republic to use Ceske Pivo / Czech Beer as a trademark for beer brewed using the certain technologies in the certain latitude. It won’t change much for export of the well-known labels, however it should lead to higher customer satisfaction.

The reason is; beers like Staropramen or Pilsner Urquell are made in Russia, Poland or Slovakia, its externals however do not say much about the possibility of slight taste change. The Ceske pivo sign would say it all. If it is passed, we are probably going to see that label in half a year.

The other purpose is to distinguish similar labels, like the famous Budejovicky Budvar / Budweiser dispute. If both the beers use the same name and technology, the one directly from the Czech Republic should clearly say so.

The Czech currency strengthening paused for a moment, after a season of reaching new heights it got back from 23 to 23,50 per Euro. Behind such a sudden fall is the speech of the governor of the Czech National bank Zdenek Tuma. He said for Bloomberg agency, that because of strong currency the interest rates are probably going to be lowered in August. The crown immediately weakened.

Czech Crown have strengthened by incredible 23% to Euro during the last half year. Strength, which brakes inflation because of lowering of costs of import influences also salaries and fuels.
It bring problems to Czech economy; Skoda Auto announced that even when they sold more cars, their gross profit decreased of 13,2 percent.

Even when the Czech GDP is still growing, the folks are still dissatisfied. Why? Low salaries compared to rising prices of everyhing. To rent a flat in Prague, I mean a small flat with a kitchen in the living room, costs 12 000 czk, 500€/month at least.

Allow me to present a little calculation here: the Average Czech salary is 20 000czk, which is 833€/month. After paying the state taxes, one is left with 15 000 czk, 625 € a month. The very cheapest flat 1 room 1 bedroom in the most ugly part of Prague in the most ugly Russian block of flats costs 1 800 000 czk, which is 75 000€. If we count in the charges for a decent mortgage, we must count in another 200 000 czk, about 8300 €. So, if an average Czech wants to buy the cheapest flat in Prague, let’s say he/she will live on bread and water and give one third of salary away every month to pay 5 000 mortgage, the flat will be his/her in 33 years. So, if a Czech buys a flat when being 25 yo, he/she will be out of the debt two years before the retirement.

The prices of fuels are climbing new peaks, and the taxi drivers even demonstrated for the possibility of increasing the fares. They claim the price of one kilometre increased twice.

The problem is, the increase comes in time, when tourists and locals often report the taxi drivers prey on them, and at the same time the central office advocate their drivers and do not make any steps for improving the situation.

On one hand the taxi companies say the increase in fares will allow their drivers to do their job properly without stealing, on the other hand we know this would only be efficient if there would be effective laws preventing the industry preying.

Taxi prices for one kilometre in Prague
In 1991 – 7 czk
In 1993 – 10czk
In 1996 – 12 czk
In 1997 – not regulated = astronomical
In 2000 – 17czk
In 2004 – 22 czk
In 2007 – 25 czk
Nowadays probably – 28 czk