Ifs Presentation CIA 3

8/6/2019 Ifs Presentation CIA 3

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YEAR 1945-1948 The Czechoslovakeconomy emerged from World War II

relatively undamaged.

Exports of machinery and consumer goods paid for

imports of materials for processing. Agriculture and foreign trade was in the foreign hands.

By 1948 Czechoslovak production approximated pre-war levels, agricultural output being somewhat lowerand industrial output somewhat higher than earlierlevels.

Labour force was skilled and productive.


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YEAR 1948-1960 First Five-Year Plan (194953) was introduced and

main focus was on production of goods.

The country became an important supplier of machinery

and arms to other communist countries. Second Five-Year Plan (1956-60) was introduced and

during this period investment continued to grow at highrate and national income grew by 6.9%.

In 1958-59 due to some trouble first economic reformswas done and it involved some limited decentralizationof authority, most notably giving enterprises moreautonomy in handling investment funds.


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IN 1960S In early 1960s industrial production stagnated and the

agricultural sector also registered a relatively poorperformance.

Third Five-Year Plan (196165) was introduced but itwas dropped after recession in 1962 and in year nationalincome declined.

In late 1960s and early 1970s economy continued togrow at a respectable rate throughout this period.

Fourth Five-Year Plan (1966-70) was introduced andduring this period product grew at an average annual rateof6.9 %, well exceeding the planned yearly increase of4.1 to 4.4 %.


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IN 1970S Fifth Five- Year Plan (197175) was introduced and

during this period net material product grew somewhatmore slowly, averaging 5.7% yearly, but still exceededthe planned rate of 5.1% yearly.

Wages, incomes, and personal consumption levels rose atrespectable rates despite an overall increase ininvestment and agriculture continued to be weak.

The Energy and Trade problems Czechoslovakia facedin the late 1970s were also major factors in theslowdown in industrial growth.

Restraints on imports from non communist countriesreduced inputs for domestic industries.


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ECONOMYGROWTH In 1938 per capita GDP was $1800.

In 1950 per capita GDP was $3501.

In 1973 per capita GDP was $7041.

In 1990s per capita GDP of CHEZ REPUBLIC was$8895 and of SLOVAKIA was $7762.


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BANKING SYSTEM The head of the country's banking system was the State Bank

of Czechoslovakia. The State Bank was the central bank, thegovernment's financial agent, the country's commercial bank,an investment bank, and the clearing agent for collection

notices. The Commercial Bank of Czechoslovakia was primarily the

bank for foreign currency transactions. Three additional bankstwo of which were savings banks,

one for each of the republics, providing credit toindividualscompleted the banking system in 1980. The central authorities set interest rates, which neither

reflected the cost of capital nor appreciably affected the flowof credit.


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CHEZ REPUBLICIn November 1989, Czechoslovakia returned to a liberaldemocracy through the peaceful "Velvet Revolution". However,Slovak national aspirations strengthened and on January 1,1993, the country peacefully split into the independent CzechRepublic and Slovakia. Both countries went through economicreforms and privatisations, with the intention of creating acapitalist economy. This process was largely successful, as in2006, the Czech Republic was recognised by the World Bank asa "developed country" and in 2009 the Human Development Indexranked it as a nation of "Very High Human Development".

From 1991, the Czech Republic, originally as part ofCzechoslovakia and now in its own right, has been a member ofthe Visegrd Group and from 1995, the OECD. The CzechRepublic joinedNATO on 12 March 1999 and the EuropeanUnion on 1 May 2004. It held the Presidency of the EuropeanUnion for the first half of 2009.


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YEAR 1990-95After 1991, consistent liberalization and astute economicmanagement has led to the removal of95% of all pricecontrols, low unemployment, a positive balance ofpaymentsposition, a stable exchange rate, a shift of exportsfrom formercommunist economic bloc markets to WesternEurope, and relatively low foreign debt. Inflation has beenhigher than in some other countries - mostly in the 10%range- and the government has run consistent modestbudget

deficits. Two government priorities have been strict fiscalpolicies and creating a good climate for incoming investmentin the republic. Restructuring of existing banking andtelecommunications facilities and FDI share was 12.9%.


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YEAR 1995-2000 Political and financial crises in 1997 shattered the Czech

Republic's image as one of the most stable and prosperous ofpost-Communist states. Delays in enterprise restructuring andfailure to develop a well-functioning capital market playedmajor roles in Czech economic troubles, which culminated ina currency crisis in May.

Current account deficit, which reached nearly 8% ofGDP.

Growth dropped to 0.3% in 1997, -2.3% in 1998, and -0.5% in 1999.

The economy, fueled by increased export growth andinvestment, was expected to recover by 2000.


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YEAR 2000-05Growth in 2000-05 was supported by exports to the EU, primarilyto Germany, and a strong recovery of foreign and domesticinvestment. Domestic demand is playing an ever more importantrole in underpinning growth as interest rates drop and theavailability of credit cards and mortgages increases. Current

account deficits of around 5% ofGDP are beginning to declineas demand for Czech products in the European Union increases.Inflation is under control. In early 2004 the government passedincreases in the Value Added Tax (VAT) and tightened eligibilityfor social benefits with the intention to bring the public financegap down to 4% of GDP by 2006, but more difficult pension and

healthcare reforms will have to wait until after the next elections.Privatization of the state-owned telecommunications firm eskTelecom took place in 2005. Intensified restructuring among largeenterprises, improvements in the financial sector, and effective useof available EU funds should strengthen output growth.


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YEAR 2005-10Growth continued in the first years of the EU membership.The credit portion of the Financial crisis of 20072010 didnot affect the Czech Republic much, mostly due to itsstable banking sector whichhas learned its lessons duringa smaller crisis in the late 1990s and became much morecautious. As a fraction of the GDP, the Czech public debtbelongs among the smallest ones in Central and EasternEurope. Moreover, unlike many other post-communistcountries, an overwhelming majority of the household debt -over 99% - is denominated in the local Czech currency.

That's why the country wasn't affected by the shrunkenmoney supply in the U.S. dollars. However, as a largeexporter, the economy was sensitive to the decrease of thedemand in Germany and other trading partners. In the middleof 2009, the annual drop of the GDP for 2009 was estimated

around 3% or 4.3%, a relatively modest decrease.


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STATISTICS GDP (pp.): $266.3 billion (2008)

GDPGrowth: 3.9% (2008)

GDP per capita (pp.): $26,100 (2008)

GDP by sector:Agriculture: 2.9%Industry: 38.7%Services: 58.7% (2008)

Inflation: 3.6% (2008)

Labour Force: 5,370,000 (2008) Unemployment: 6%(2008)

Industrial production growth rate: 7% (2008)

Public Debt: 4% GDP (2008)


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TRADE & FINANCE Exports: $122 billion (2007) Export goods: machinery and transport

goods 52%, raw materials 9%, chemicals 5%, other 34% (2003). Imports: $116.6 billionImport goods: machinery and transport goods

46%, raw materials and fuels 16%, chemicals 10%, other 28% (2003) Export partners: Germany 30.8%, Slovakia 8.7%, Poland 5.9%,

France 5.4%, UK5.1%, Italy 4.9%, Austria 4.6% (2007). Import partners: Germany 31.4%,Netherlands 6.7%, Slovakia 6.4%,

Poland 6.3%, Austria 5.1%, China 5.1%, Russia 4.5%, Italy 4.4%,France 4.1% (2007).

Reserves: $34.59 billion (2007)

ForeignDirect Investment: $86.75 billion (2007) Czech InvestmentAbroad: $6.058 billion (2007) Exchange rates: koruny (K) per US$1 18.277 (December 2007)

23.957 (2005), 25.7 (2004), 28.2 (2003), 32.7 (2002), 38.0 (2001),38.6 (2001), 34.6 (1999), 32.3 (1998), 31.7 (1997), 27.1 (1996), 26.5(1995)


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FINANCIAL MARKET Prague StockExchange

Location: Prague, Czech Republic Currency: CZK

Indexes: PX Index, PX-GLOB MONEYMARKET:

In the Czech Republic, short-term state securities (withmaturity under one year) include exchequer bills and bills ofthe Czech National Bank (CNB). They may be acquired bylegal entities as well as physical persons who have a propertyaccount at the CNBs Registration Center. Exchequer bills areregistered securities registered in the Short-term bond system.


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CAPITAL MARKET BONDMARKET:

The Czech capital market is dominated by debt securities(especially bonds). On the public markets, the vast

majority of transactions with bonds are realized in thestock exchange market organized by the Prague StockExchange.

STOCKMARKET

DERIVATIVEMARKET


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SECURITIES TRADED Prague StockExchange:

The Prague Stock Exchange (PSE) is the principal market in the CzechRepublic where listed shares and other investment instruments are traded.Securities are classified according to the market on which they are traded,i.e. Main, Secondary, New or Free. No shares have yet been traded on the

New market. RM-System:The RM-System the secondary market is based on computerized bidand offer matching. Deals can be made through a broker or directly via anationwide network of approximately 250 offices. Most listed securitiescan be traded on this market.

Over-the-CounterMarket Securities Center:

Most Czech shares are registered in the computerized Securities Centerinan uncertificated (paperless) form. According to the Czech legislation,only shares, investment certificates, bonds, investment coupons, couponsand warrants can exist in uncertificated form.


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BANKS Czech National Bank:

Monetary stability has an internal dimension (price stability) and anexternal dimension (exchange rate stability). Recently, the internaldimension of the monetary stability price stability i.e. creation

of low-inflation environment has become the primary objective ofcentral banks. Achieving and maintaining monetary stability is thecentral banks ongoing contribution to the creation of conditions forsustainable economic growth. Central bank independence is a

prerequisite for implementation of the monetary policy leading to

price stability. The primary aims of the monetary policy and thecentral banks objectives are laid down in the provisions of Section98 of the Constitution of the Czech Republic and of Section 2 of theAct No. 6/1993 Coll., on the Czech National Bank. These entrustthe Bank with maintaining the price stability.


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BANKS Czech Export Bank:

The Czech Export Bank (CEB) is a part of the states pro-export policy system. It is a specialized banking institution theownership of which is split between the state (69.7%) and the

state-owned Export Guarantee and Insurance Corporation(EGAP). Pursuant to the Act No. 58/1995 Coll., on state-supported export insurance and financing and the amendmentto the Act No. 166/1993 Coll., on the Supreme Audit Office,as amended ("Act No. 58/1995 Coll."), CEB is entrusted withthe provision of state-supported financing. The Act definesstate-supported financing as short-term and long-termfinancing and the provision of export credits, financing ofproduction for export, investment credits, project financing

credits and the provision of export-related financial services.


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Ifs Presentation CIA 3

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