Czech Republic’s foreign trade surplus is the highest in three years, but industrial production is falling unexpectedly deep
The November indicators released today for domestic foreign trade and industrial production provide a significantly different picture, even if they are partially interconnected areas.
Foreign trade performed unexpectedly well, recording a surplus of 30.8 billion crowns. This is the highest monthly surplus in the entire period since November 2020, i.e. the last three years (see graph below). Foreign trade thus returns to the levels that characterized the period before the start of the Covid pandemic. Its decline, which began in 2021, has radically overloaded international supply and consumption chains, shattering and paralyzing them. This also had negative repercussions on Czech foreign trade, because, for example, domestic car manufacturers and exporters had to wait a long time for the delivery of some key components, such as chips.
At the same time, the effects of the war in Ukraine were reflected in the deterioration of the state of foreign trade of the Czech Republic, especially in its first year, 2022, when energy prices increased dramatically as a result, led by natural gas and from oil. , on whose imports the Czech Republic is heavily dependent. High prices for energy imports and the paralyzed export of traditional export items, first and foremost cars, have resulted in historically record deficits in Czech foreign trade in 2022. However, this phase is obviously now over forever.
In particular, last November car exports contributed to the highest surplus in three years. At the same time, the deficit in oil and natural gas trade has narrowed, thanks to the decrease in imported quantities. Already in October the gas tanks in the Czech Republic were almost one hundred percent full, so in November, with the arrival of colder weather, partial pumping from them took place, without the need to import a larger amount of gas.
At the same time, however, there was an unexpectedly significant decline in the industry in November. While the foreign trade surplus in November was almost double the most optimistic analytical estimate, industrial production, on the other hand, lagged behind all expert estimates. On an annual basis it fell by 2.7%, while according to analysts interviewed by the Bloomberg agency the value would have been only 1.5%.
Although car production increased, which helps to explain the aforementioned brilliant foreign trade performance, it failed to compensate for the decline in most other sectors, particularly in the production of machinery and also, for example, building materials. The decline of these sectors is linked to the slowdown of the global, European and national economy, which occurs mainly due to exceptionally high inflation in several countries around the world, which consequently constrains economic activity and investment activity in many countries. sectors, including mining and construction.
The unexpectedly sharp decline in industry is another reason why the Czech National Bank will further reduce core interest rates this year, thus helping to support industrial production.
For the full year 2023, foreign trade will end with a solid surplus of around 130 billion crowns, which will be the best result since 2020. This year the surplus could fluctuate up to 120 billion crowns. Industrial production
on the contrary, it will stagnate more or less throughout the year, next year it is expected to reach growth of 2%, it will be helped by the decline in inflation and the general revival of growth of the Czech economy.
From Twitter author
2024-01-08 23:02:15
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