Improving Czech Trade Balance: A Glass Half Full

The Czech CSO has, again, reported an improvement in the terms of the Czech Repulic's external trade. However, this glass is half full or half empty, because, similarly to Hungary and Slovakia, this is due to exports remaining at level of November 2008 and imports falling by 8.0% year-on-year.

The national break-down of the Czech external trade statistics is telling:

• The Czech Republic gained ground in France (surplus up by CZK 2.0 bn), the United Kingdom (by CZK 1.8 bn), Spain (by CZK 1.7 bn), Slovakia (by CZK 1.3 bn) and Germany (by CZK 1.0 bn). Balance improved in trade with Hungary (by CZK 1.9 bn) as deficit turned into a surplus.
• A relative improvement is that the trade deficit with China went down (by CZK 3.8 bn), the Russian Federation (by CZK 1.8 bn and Norway (by CZK 1.5 bn).
• The Czech lost ground in Poland (by CZK 2.1 bn as surplus changed into a deficit) and the Netherlands (surplus down by CZK 1.2 bn).

The good news is that the Czech Republic is on a healthy convergence path towards Western Europe where it is gaining ground, and its productivity gains are putting it ahead of Hungary that has fallen behind the V4 Group. However, Poland, the country that stood out as the best-performing EU country in the world economic crisis has excelled the Czech Republic.

The glass is full empty, because the country is still energy-dependent (Russia, Norway, the Netherlands) and it was helped by falling oil and natural gas prices, largely due to falling manufacturing production. However, as manufacturing will recover, energy demand and prices will soar that will put an extra competitiveness pressure on the V4 economies and merit less energy-intensive and dependent Western European countries.