Czech 2011 foreign trade surplus surpasses estimates - analysts

Foreign trade surplus rose by Kc70.2bn year-on-year to Kc191.4bn last year. In December 2011 alone, foreign trade showed a Kc10.5bn surplus, an increase of Kc10.4bn compared with December 2010.

Last year's trade surplus by a wide margin exceeded the hitherto record from 2009 when surplus amounted to Kc149.6bn, according to Czech Exporters' Association.

Raiffeisenbank analysts, for example, expected the trade surplus in 2011 to reach Kc169bn.

Foreign trade results for December also beat expectations in most indices, UniCredit Bank analyst Pavel Sobisek said.

"Exports grew at a double digit pace. The surplus to cross-border statistics was record-high in a comparison of December months and the deficit to the methodology of change in ownership was lower than expected," Sobisek said.

The good results were achieved thanks to demand from all territories, Sobisek said. Exports to Russia, for example, increased by 60 percent year-on-year.

"It seems that the economy has not crashed to the ground yet thanks to the surprisingly tough German economy which is moving forward relentlessly despite the huge problems of the euro zone's southern part. It looks as if the Greek crisis was convenient for Germany," Vladimir Pikora, an analyst at company Next Finance, said.

"We did not even have a foreign trade deficit which we typically see in December," Pikora said.

He noted it is interesting to watch the pace of the growth of exports. Exports growth accelerated to 10.1 percent in December, while the pace of imports slowed down to 5.1 percent.

"This is a signal that Germany, our biggest trading partner, happily buys our goods, while domestic demand is weakening amid expectations of a crisis," Pikora added.

But exports were not the only reason behind the good foreign trade results in December, according to Sobisek.

"The balance improved also thanks to a considerable slowdown of imports in the category of consumer goods, investment products and semi-finished products, which overall indicates that domestic demand is weak," Sobisek said.

"Companies probably emptied their warehouses substantially at the end of the year owing to expectations of a worsened economic situation at the beginning of this year. It is a question to what extent their expectations are being fulfilled," he added.

This year, imports as well as exports will probably fall owing to the development in the euro zone, Pikora said.

"But for now the development seems to be heading towards a combination of three problems - the debt crisis, the bank crisis and recession. Demand for Czech goods must inevitably drop as a result," Pikora said.

"The only thing that would keep us afloat would be a German miracle - if Germany managed to survive a downswing in the euro zone without a fall of its own economy," he said.

But the experience from 2009 shows that foreign trade surplus will continue to grow because imports will drop at a faster pace than exports.

"In 2012, the surplus should be even higher and exceed the unbelievable sum of Kc240bn," Pikora added.

Vaclav France of Raiffeisenbank estimates that foreign trade surplus will reach Kc154bn this year.

Czech Exporters' Association chairman Jiri Grund said it will be important for exporters to maintain positions in traditional export territories, that is mainly in Europe and above all in Germany.

"We must continue to increase our ability to compete and try to cope with swings in foreign demand. This year, the acid test for us will be whether we have prepared ourselves for a time of weaker demand, and whether we managed to increase our ability to compete and cut costs sufficiently," Grund said.

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Author: ČTK
www.ctk.cz