Czech exporters credit koruna cap for CZK450bn boost in 2014-2015

By bne IntelliNews April 5, 2016

Czech exports reached a new record of CZK3.9tn (€144bn) in 2015, a rise of 7.2% y/y, the Czech Association of Exporters (AE) reported on April 5. The lobbyist credited the Czech National Bank’s cap on the koruna for the rise.

The claim will be welcomed by the central bank, which has been forced to defend its policy to keep the currency at CZK27 to the euro or higher from political pressure, led by President Milos Zeman. The CNB's cap has appeared instrumental in helping GDP growth to a seven year high of 4.3% last year.

That expansion came in the face of the stuttering recovery in the Eurozone, which provides the vast bulk of export demand for the small and open economy. The CNB suggested late last month that it is ready to extend the cap once more due to low inflation.

Without the cap, which was launched in November 2013 and will now likely remain in place until mid-2017, exports would have been as much as CZK450bn lower, AE deputy chairman Otto Danek claimed, according to CTK. With the policy in place throughout 2016, exports could set yet another new record by breaking the CZK4tn mark this year, the association forecasts.

Exporters across the board benefited from a weaker koruna, Danek said. However, businesses in the manufacturing sector and booming car industry did especially well. "Fifty-five percent of exports were from the automotive and machinery segments. Relatively strong were also the mechanical, electrical, chemical and rubber industries," he reported.

The Czech Republic recorded a trade surplus for the second month in a row in January, data released by the statistics office on March 8 showed. The country's trade balance finished the month CZK19.3bn in the black, an increase of CZK0.7bn y/y.

Although exports to Russia dropped by over 30% last year, due to EU sanctions and the recession in the eastern giant, higher exports to the Czech Republic's traditional EU partners made up for the losses. The trade surplus with EU states rose CZK1.8bn y/y to total CZK60.1bn in January. Trade with countries outside the bloc resulted in a CZK39bn deficit.

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