intermodal containers

William Malcolm

Czech Exports Surge To Record Levels

According to the Association of Exporters, exports of goods from the Czech Republic abroad could increase by nine percent year-on-year to a record 3.8 trillion crowns this year. However, the foreign trade balance should end with a negative balance for the first time since 2010, at around 50 billion crowns. Last year, the foreign trade balance was plus 180 billion crowns. Otto Daněk, vice-chairman of the Association of Exporters, told ČTK at today’s Export Forum in Mladé Buky.

According to him, the forecast will be valid if there is no reversal of the covid epidemic by the end of the year, such as various closures. According to Daňek, the second threat is a possible significant deterioration of the already very serious shortage of parts for production and some raw materials. So far, the highest export of goods from the Czech Republic was in 2019, amounting to 3.69 trillion crowns. Last year, the volume of exports fell to 3.48 trillion crowns due to the coidemic epidemic.

The Czech Statistical Office said on Monday that the Czech Republic’s foreign trade ended in a deficit of CZK 13.3 billion in September, a year-on-year result that was CZK 47.2 billion worse. According to the CZSO, the import side is negatively affected mainly by fossil fuel prices and export problems in the automotive industry. “Motor vehicle exports are likely to fall by more than 100 billion crowns this year compared to 2019,” Daněk said. From the beginning of the year to the end of September, exports increased by 17 percent year-on-year to 2.9 trillion crowns and imports by 20.6 percent to 2.87 trillion crowns.

However, according to Danek, the increase in exports in absolute numbers is not reflected in the higher profitability of manufacturing export companies. Businesses are facing a significant increase in costs, mainly due to higher prices of materials. According to Daňek, further increased costs are borne by companies due to rising energy prices, rising wages, more expensive transport and a strengthening of the koruna. Manufacturers are also facing staff shortages.

“According to a survey of members of the Association of Exporters, their costs increased by almost 19 percent between January and October. They managed to increase prices by an average of ten percent. The negative impact is 8.6 percent, so those who did not have at least nine percent profitability, already is starting to show a loss, “said Danek.

According to him, the actions of the Czech National Bank (CNB) do not help exporters in the current situation either. According to the Association of Exporters, the latest significant increase in CNB interest rates is an unfortunate step that will not curb rising inflation. A side effect of the rate increase will be the strengthening of the koruna’s exchange rate, which according to Danek will damage export companies and the entire Czech economy. The Association of Exporters claims that strengthening the koruna against the euro by one crown per euro reduces exporters’ incomes by almost 180 billion crowns per year and the Czech Republic’s gross domestic product by 20 billion crowns.

On 4 November, the CNB Board raised the key interest rate by 1.25 percentage point to 2.75 percent. This was the most significant increase in rates since 1997. The main reason for the rise in interest rates is rising inflation, which approached 6% in October.