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Mon, Dec 01, 2008 - Page 10 News List

Czech shoppers shrug off crisis as employers struggle

AFP , PRAGUE

Most Czechs are shrugging off the global financial turmoil ahead of the fast-approaching Christmas shopping spree, but growing worries in the corporate sector suggest they should be on alert.

On Friday, statisticians said consumer confidence in the economy grew by 0.7 points last month against a month earlier, in stark contrast to a 6.6-point contraction in business confidence.

“Consumers should probably show some fear, but they haven’t so far,” Next Finance analyst Marketa Sichtarova said.

Instead, Czechs were filling shops, open seven days a week and often till late at night, in a chase for Christmas presents, ignoring the financial crisis that has forced employers throughout the former communist country to cut both production and jobs.

“Consumers still see real incomes grow, while companies are confronted with falling demand above all from abroad,” Sichtarova said.

Poor demand in western Europe, a key market for Czech exporters, has forced Czech producers such as the country’s largest car maker Skoda Auto to announce production cuts or, worse, job cuts affecting thousands of people.

The center-right coalition cabinet has been taking the crisis in its stride so far, pointing to the healthy banking sector. But this week it said it was working on a rescue plan and planning to boost labor market flexibility.

Czech Prime Minister Mirek Topolanek also said the Cabinet would like to “create room for low interest rates through fiscal and economic policies in order to boost investment and exports which are threatened the most by the cooldown.”

Over the past month, 21 companies have announced layoffs, planning to sack 9,000 people because of falling demand and as a step to prevent the impact of the looming crisis, the Hospodarske noviny daily wrote on Wednesday.

This Christmas will be especially sad for the 1,250 staff of Bohemian crystal maker Sklo Bohemia, which wound up a month ago, sacking whole families that had worked at the company for decades.

Czech unemployment may climb to 6.7 percent next year from 5.2 percent in October because of the crisis, the CTK news agency wrote, citing analysts.

International organizations have revised their growth forecasts for the Czech Republic downward, saying they expect a contraction this year and next year after a record-high 6.6 percent economic growth last year.

The IMF expects the Czech economy to grow by less than 2 percent next year, down sharply from a previous forecast of 4 percent. The European Commission predicted a slowdown to 3.6 percent.

“We have to get used to slower economic growth and to a more difficult economic situation,” said Patria Finance analyst David Marek, adding “companies will not raise wages next year, which is a clear result of the financial crisis.”

Still, the ordinary shopper seems careless as Christmas draws nearer. An average Czech is planning to spend about half of the average monthly wage on Christmas presents and delicacies, surveys showed.

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