2010 has gone by, welcome 2011. What was a year to fear for businesses has held its promises. The Czech Republic has swung full speed into the crisis, although many people, including top managers, have long believed it would escape harmless from the world’s disorders. As a result, employment has plummeted, private consumption went down and many small businesses went bust.
So is the worst behind us? In one way, yes. The GDP of Germany, the largest export market for Czech products, is up and foreign direct investments are coming back. But the reality is far more complex. Car export sales and related equipment manufacturing make up more than 20 percent of the Czech GDP, and an increase of private consumption will be critical to any domestic recovery. So is the worst behind us? In one way, yes.
The new right-leaning governing coalition’s planned budget cuts, although welcomed with strong protestations, appear inevitable in order to keep the country’s finances on track. So these austerity measures will certainly impact the spending mood of the Czech consumers. Add to this that less than 25 percent of the European funds marked for the Czech Republic are effectively used, and you can guess that for some sectors — such as heavy equipment, building and civil engineering companies and, of course, retail — 2011 might still be rocky.
So let’s plan for the worst and hope for the best.
After all, the level of debt — both private and public — is still remarkably low and very few consumers have loans denominated in foreign currencies (such as euros or Swiss francs), as people do in Hungary or in Poland. The Czech crown is strong and might appreciate even a little. Cautiousness is the key, but the foundations are solid. And the melting snow might warm up the consumers spending mood. ...
Staying on the map
Being in charge of a Czech subsidiary of a foreign-owned company, the biggest threat for me would be that Czech Republic disappears from the radar screen of the Paris headquarters. The country is small and the potential market is somehow limited; if 2011 does not show a clear recovery, it might be difficult to justify and push for further investment in the country. What has made Central and Eastern Europe sexy so far was the remarkable and constant double-digit growth.
What has made Central and Eastern Europe sexy so far was the remarkable and constant double-digit growth we enjoyed since the ’90s. Should this slow down, then we will be just another developed market the size of Belgium or Portugal. So the answer is clear: make our offer attractive, innovate with products, introduce new services.
Czech consumers still have a lot of needs, and their disposable income will allow them to improve their living standards. We just have to remember that their wishes are different and must be understood. More positive visibility for this country will be critical, and the coming trips of Prime Minister Nečas to the west (including Paris next week) will certainly help!