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Czech Republic Economy 1996

    • Overview:
      The government of the Czech Republic, using successful stabilization policies to bolster its claims to full membership in the western economic community, has reduced inflation to 10%, kept unemployment at 3%, balanced the budget, run trade surpluses, and reoriented exports to the EU since the breakup of the Czechoslovak federation on 1 January 1993. GDP grew 2% in 1994 after stagnating in 1993 and contracting nearly 20% since 1990. Prague's mass privatization program, including its innovative distribution of ownership shares to Czech citizens via 'coupon vouchers,' has made the most rapid progress in Eastern Europe. When coupon shares are distributed in early 1995, 75%-80% of the economy will be in private hands or partially privatized, according to the Czech government. Privatized companies still face major problems in restructuring; the number of annual bankruptcies quadrupled in 1994. In September 1994, Prague repaid $471 million in IMF loans five years ahead of schedule, making the Czech Republic the first East European country to pay off all IMF debts. Despite these outlays, hard-currency reserves in the banking system totaled more than $8.5 billion in October. Standard & Poor's boosted the Republic's credit rating to BBB+ in mid-1994 - up from a BBB rating that was already two steps higher than Hungary's and one step above Greece's rating. Prague forecasts a balanced budget, at least 3% GDP growth, 5% unemployment, and single-digit inflation for 1995. Inflationary pressures - primarily as a result of foreign bank lending to Czech enterprises but perhaps also due to eased currency convertibility controls - are likely to be the most troublesome issues in 1995. Continuing economic recovery in Western Europe should boost Czech exports and production but a substantial increase in prices could erode the Republic's comparative advantage in low wages and exchange rates. Prague already took steps in 1994 to increase control over banking policies to neutralize the impact of foreign inflows on the money supply. Although Czech unemployment is currently the lowest in Central Europe, it will probably increase 1-2 percentage points in 1995 as large state firms go bankrupt or are restructured and service sector growth slows.

    • National product:
      GDP - purchasing power parity - $76.5 billion (1994 est.)

    • National product real growth rate:
      2.2% (1994 est.)

    • National product per capita:
      $7,350 (1994 est.)

    • Inflation rate (consumer prices):
      10.2% (1994 est.)

    • Unemployment rate:
      3.2% (1994 est.)

    • Budget:

        $14 billion

        $13.6 billion, including capital expenditures of $NA (1994 est.)

    • Exports:
      $13.4 billion (f.o.b., 1994 est.)

        manufactured goods, machinery and transport equipment, chemicals, fuels, minerals, metals, agricultural products (January-November 1994)

        Germany 28.7%, Slovakia 15.5%, Austria 7.9%, Italy 6.4%, France 3.2%, Russia 3.2%, Poland 3.1%, UK 2.9%, Netherlands 2.4%, Hungary 2.2%, US 2.1%, Belgium 1.3% (January-June 1994)

    • Imports:
      $13.3 billion (f.o.b., 1994 est.)

        machinery and transport equipment, manufactured goods, chemicals, fuels and lubricants, raw materials, agricultural products (January-November 1994)

        Germany 24.1%, Slovakia 15.6%, Russia 9.8%, Austria 7.6%, Italy 4.9%, France 3.6%, US 3.2%, Netherlands 2.9%, UK 2.8%, Poland 2.7%, Switzerland 2.2%, Belgium 2.0% (January-June 1994)

    • External debt:
      $8.7 billion (October 1994)

    • Industrial production:
      growth rate 4.9% (January-September 1994)

    • Electricity:

        14.470,000 kW

        56.3 billion kWh

        consumption per capita:
        4,842 kWh (1993)

    • Industries:
      fuels, ferrous metallurgy, machinery and equipment, coal, motor vehicles, glass, armaments

    • Agriculture:
      largely self-sufficient in food production; diversified crop and livestock production, including grains, potatoes, sugar beets, hops, fruit, hogs, cattle, and poultry; exporter of forest products

    • Illicit drugs:
      transshipment point for Southwest Asian heroin and Latin American cocaine to Western Europe

    • Economic aid:

        1.4 million annually to IMF beginning in 1994

    • Currency:
      1 koruna (Kc) = 100 haleru

    • Exchange rates:
      koruny (Kcs) per US$1 - 27.762 (January 1995), 28.785 (1994), 29.153 (1993), 28.26 (1992), 29.53 (1991), 17.95 (1990)

        values before 1993 reflect Czechoslovak exchange rates

    • Fiscal year:
      calendar year

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