Czech exports still struggling to break dependence on EU

By bne IntelliNews March 15, 2013

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The Czech Republic remains dependent on the EU for over 80% of its exports, despite efforts to diversify markets. However, with the BRICs leading the way, the country is very slowly refocusing its trade ties.

The share of total Czech exports headed to EU countries fell to 80.8%, compared with 83% in 2011, according to industry and trade ministry data, reports CTK. Total Czech exports reached CZK3 trillion (€117bn) last year.

Reporting the figures, Minister Martin Kuba claimed that the result suggests some success in diversification is emerging. "Our exports are vulnerable for being so tied to Europe. We have managed to separate ourselves from Europe a bit and find new territories," he said.

However, while the 2.2 percentage point drop in dependency on EU markets for 2012 looks healthy on first glance - the figure managed to fall by only 2.5pp between 2005 and 2011 - the effect of the Eurozone crisis is sure to have had a significant impact.

Indeed, the Czech Republic suffered the longest recession in its history in 2012, spending the entire year in contraction thanks to subdued demand out of the EU, which - given poor domestic demand - is the only significant economic driver currently. That heavy dependence has been a clear risk for some time, but successive governments have struggled to break the cycle - as have their peers across the region - by raising exports to other markets sufficiently.

Like most of Europe, Prague is hoping to cement deeper trade ties with the world's emerging giants. The country's share of exports to twelve priority countries defined in the government's new export strategy increased from 14.8% to 16.8% in 2012. However, that saw Czech exports to the likes of Brazil, China and India total no more than CZK340bn.

While efforts to grow that share continue - a Czech delegation is in India for talks currently - EU countries, and in particular Germany, continue to dominate demand. On top of that, the structure of Czech exports is also unbalanced, with the share of exports carried out by the auto sector heavily outweighing all others.

Exporters report skepticism over the efforts to diversify. "It is a minor swing and only time will tell whether it will last or there will be a return to earlier figures. There are no significant reasons for a permanent trend of cutting exports to the EU," Association of Exporters chairman Jiri Grund told CTK. "The composition of our exports fluctuates but the structure is basically unchanged. This is given by the structure of our industry and links with important markets," Grund added.

The industry and trade ministry plans fifteen foreign trips in support of expanding exports in 2012, with Algeria, Israel, Morocco, Russia and Sub-Saharan Africa on the schedule.

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