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Foreign firms in CR less affected by crisis than Czech ones

02.02.2012 - 17:41 | Pick of the Week

The economic downturn in 2009 had a different impact on local companies depending on their ownership structure. The "Foreign Firms in the Czech Republic" study prepared by Drahomíra Dubská, head of the analytical department at the Czech Statistical Office (ČSÚ), shows that Czech private firms saw the deepest fall in the crisis year with their gross added value sinking 11.7% compared with the previous year. Companies under foreign control reported declines of only a quarter of this figure. The reasons behind the different performance primarily include, according to Dubská, the focus of foreign firms on exports and the strong foreign demand. Thus, accelerated performance may also be expected in 2010 and in the first six months of 2011.

No growth in the share of foreign companies in the processing industry may be expected in the coming years in respect of the ownership structure development, which is related to the drop in the inflow of foreign direct investment (FDI) in this branch. Local firms active in this segment and controlled from abroad generated more than half of the total sales since 2002. The industries with more than 50% of the foreign capital also include the engineering industry; foreign firms account for more than 60% of the gross added value in the chemical segment, electrical engineering, ICT, rubber industry, refineries and coke production and in the automotive industry. Foreign capital has the strongest influence in the financial sector with a 97.1% share in the total gross added value in this segment in 2010.

The sector of services offers a significant potential for the foreign capital now, Dubská says. This potential has already been exhausted in the case of large companies, according to the Confederation of Industry of the Czech Republic. The Confederation still sees merger opportunities, especially for mid-sized and smaller companies. The Czech Republic will remain attractive for direct investors with its quantitative advantages although the accrual of unit costs in respect of wages was the highest in the Czech Republic of all EU countries. A decline in FDI is likely to be expected in 2012, but the current pessimism related to the debt crisis impact on goods and capital flows in the Czech Republic is too exaggerated, according to Dubská. The slowdown in the Czech economic growth is rather connected with restrictions and uncertainties keeping the local demand down, which can be seen in the development of industrial sales where local sales drop while sales related to exports go up.

 

Author: Jan Neubert, redaktor ČIA

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