Exporters Continue to Boost the Economy
In 2016, Czech exporters, despite the rising geopolitical risk, experienced stable external demand and thanks to the continued ﬁxing of the exchange rate which practically unchanged the CZK/EUR rate. The balance of trade surplus (in the national context) reached a record CZK 183.9 billion, a CZK 52.9 billion improvement year-onyear. While exports grew by 1.2 %, imports declined by -0.2 %. The lower worth of imports was due to the falling prices of imported commodities and lower investment imports. As in past years, the most important export destination is the European Union, which last year accounted for 84 % of total Czech exports, with the Euro zone accounting for 65.6 %. The largest importer of Czech commodities was Germany, with a share of 32.2 % of total Czech exports. The good performance of Czech trade in goods and services was most responsible for this country´s trade surplus, which amounted to 1.6 %, the highest percentage in history.
MACHINERY AND TRANSPORT
VEHICLES TOP THE LIST OF EXPORTS The manufacture of machinery and transport vehicles was by far the most successful export sector last year. As in past years, the leader was the automotive industry, which in 2016 exported CZK 921 billion worth of motor vehicles, according to national statistics. Current development indicates that last year´s record will be surmounted. As regards engineering industry products, the second most successful export articles are electrical equipment, devices and appliances, followed by industrial machinery, such as heating and cooling systems, pumps, compressors, ventilators, boilers, ﬁttings and transport carts. Also in demand are oﬃce machines and automatic data processing equipment, such as memory units. In the GDP network, net exports helped to compensate for lower investment last year. The decline was the result of the high statistical base in 2015, which was the last year, when it was possible to draw money from EU funds in the framework of the 2007-2013 programming period. Inadequate preparedness of projects ﬁnanced with public funds and the slow start of ﬁnancing from the new 2014-2020 programming period were greatly responsible for the fall of civil engineering exports last year (-16.0 %). Total building production last year fell by 7.6 % in
real terms. Building construction declined by 3.3 %, greatly due to administration obstacles facing developers in Prague in connection with the absence of a good metropolitan plan. Lower investment and building activity negatively aﬀected last year´s industrial production. Its volume increased by a mere 2.9 % in real terms, mainly due to the successful automobile production, where the output of motor vehicles grew by as much as 11 %. On the other hand, the mining industry found itself in the red because of low commodity prices (-9.0 %) and so did chemical production (-7 %) owing to breakdowns in the Kralupy and Litvínov reﬁneries.
PULLING THE ECONOMY UP Most responsible for the growth of the Czech economy last year was household consumption. Consumption attacked the historically highest level, prompted by an extremely low unemployment rate, which in turn pressed on wages. Last year, wages grew by more than 4 % in nominal terms. This prompted the growth of spending and saving, which households realised massively on the real estate market, pushing up the prices of housing. Retail trade revenues (excl. sales of motor vehicles) last year increased by 5.6 % in real terms, with fuel sales growing by 7.5 %. The sale of motor vehicles grew by as much as 8.6 % and the entire services sector by 1.2 % in real terms. As regards the price development, for most of the year the inﬂation rate continued to be low, reaching 0.7 %. This of course had a favourable eﬀect on the purchasing power of Czech households. Nevertheless, the last few months of 2016 brought about a major acceleration of the price dynamics. In December consumer prices were 2.0 % up year-on-year, meeting the inﬂation target set by the Czech National Bank. The growth of inﬂation was partly due to the gradual waning of the positive shock of low fuel prices, more expensive food and, last but not least, the growth of prices in the nuclear component. This actually is a reﬂection of strong consumer demand stimulated by growing wages.
STABLE CZK EXCHANGE RATE
IN 2016 The exchange rate of the Czech crown in relation to the euro was exceptionally sta-
Photo: BVV archives, CLOOS PRAHA archives
Last year´s macroeconomic picture was again favourable, without showing any major macroeconomic imbalance on the domestic scene. In addition, growth expectations at the beginning of 2017 further increased. Although the rate of growth of the Czech economy last year was half that of the preceding year, its growth was broadly based and supported by both domestic and foreign demand, with only one exception: investments. In 2016, the volume of exports in real as well as nominal terms reached a record level and the balance of trade surplus was the highest in history. The same applies to the balance of payments current account. In the last months of last year the inﬂation rate began to turn back to the inﬂation target set by the Czech National Bank and overcame it immediately at the beginning of 2017.