Slovak inflation slowed to 0.8% y/y in April, a second consecutive drop of 0.2pp, Slovak Statistics reported on May 15. On a monthly basis, consumer price growth grew just 0.1%.
The results are in line with others across the Visegrad region. Surging inflation around the turn of the year showed signs of a slowdown in March as the momentum provided by fuel and food prices faded a little, and that has largely continue in April. At the same time, core inflation appears to be steadily rising, suggesting the tightened labour markets across the region are starting to create genuine demand pressure on the CPI.
Reflecting the effects of commodities prices on the headline CPI, transport prices rose 5.2% y/y in April. Food and services prices rose 1.9 %.
However, net inflation, which strips out fuel prices, grew 1.2% and influenced core inflation by 0.10pp. Those data hint that while the inflation surge is fading, sustainable price growth, driven by improving domestic demand, is in the pipeline.
Core inflation, which excludes regulated prices – including those in the energy sector – rose to 1.5% in April. The government cut regulated energy prices in the first quarter, and the utilities segment clipped -0.01pp from headline inflation.
“We suspect that the strong labor market is gradually being reflected in the development of prices on the market,” write analysts at the National Bank of Slovakia.
Slovakia aims to conclude an initial public offering (IPO) of its 49 percent stake in mobile and fixed-line operator Slovak Telekom by the end of June, the Economy Ministry said on Wednesday.
A plan to consolidate the state’s holding under a single government agency was approved on Wednesday, moving another step closer to an IPO, with the government also declaring its preference for a public offering of the shares rather than a sale to majority shareholder Deutsche Telekom. “We do not know exactly when shares will get to the stock exchange, but we would like to have it concluded by the end of the first half,” ministry spokeswoman Miriam Ziakova said. The government has said it would seek a dual London and Bratislava listing for the business. Slovak Telekom reported 2014 earnings before interest, tax, depreciation and amortisation of 310.7 million euros on sales of 767.6 million euros and the government’s 2015 budget has predicted a 1 billion euro return from the share sale. Deutsche Telekom has 51 percent stake of the Slovak business and has been considered a potential bidder for the rest, with a right of first refusal under certain conditions.
“Deutsche Telekom had the opportunity to present an offer for buying shares before the start of the IPO process … Today the government approved the IPO process,” the ministry spokeswoman told Reuters. “We cannot prevent Deutsche Telekom from making an offer, but today the government approved a sale through the stock exchange. If Deutsche Telekom comes with an offer by the time of placement, the government would consider it.” Deutsche Telekom said it would still look at the minority stake but appeared to be unconcerned by the prospect of an IPO. “Our strategy regarding our European participations has always been to look at opportunities from a perspective of whether it makes economic sense. We will do the same with Slovak Telekom,” a Deutsche spokesman said. “From an operational and economic perspective, the sale of the Slovak government’s stake does not change much for us. We can continue to execute our strategy.” The government is being advised on the IPO by JP Morgan and Citigroup.
Russia deployed an “extremely high” number of intelligence officers at its Czech embassy last year, the NATO member country’s secret service said in an annual report released on Monday. The reported increase in spying comes as relations between Russia and the West have worsened, culminating in the Ukraine crisis that began a year ago with street demonstrations against pro-Russian president Viktor Yanukovich. Czech spy-watchers have long warned about Russian intelligence services activities in the central European country, a member of the European Union, which is popular with Russians who often travel to and buy property in the country. The Security Information Service (BIS) said Russian and Chinese spies in the Czech Republic work mostly to use politicians or journalists to extend their influence and secure their countries’ economic interests. “Both the Russian and the Chinese embassy employ intelligence officers serving under diplomatic cover. In 2013, the number of such officers at the Russian embassy was extremely high,” the BIS report said. Other intelligence officers traveled to the Czech Republic individually as tourists, experts, academics or businessmen. “Russian intelligence services attempted to make use of both open and covert political, media and societal influence to promote Russian economic interests in the Czech Republic,” the report said. Russian intelligence activity previously jumped in 2007, when the Czech Republic and the United States held negotiations on building a missile defense radar in the country. The plan was eventually canceled by President Barack Obama’s administration after also running into opposition in the Czech parliament.
The current center-left Czech government has taken a cautious approach as relations between Western countries and Russia have deteriorated this year over Moscow’s role in the Ukraine crisis. A number of Czech officials have spoken against sanctions imposed by Brussels — for which Russia has retaliated by banning food imports from Europe — although the government has backed the EU’s actions. Yanukovich’s overthrow in February prompted Moscow to annexe the Crimea peninsula and back separatist rebellions in eastern Ukraine in which more than 3,700 people have died. The BIS has in the past warned of Russian intelligence officers building networks in the country using Czech citizens as well as the local Russian community. The Polish government said on Saturday it had withdrawn accreditation from a Russian journalist after arresting two Poles, including a military officer, earlier this month on suspicion of spying for Russia. The BIS said rejecting Czech visas or accreditation for Russians with ties to the intelligence services had led to cases of retaliation against Czech career diplomats.
The Czech Republic’s economic recovery remains fragile due largely to uncertainties in the euro zone but nothing has happened so far to make the central bank change its policy of keeping the crown weak, a bank board member said on Wednesday. The export-reliant Czech economy has shown accelerating growth since ending a record-long recession in 2013. Inflation, however, remains subdued despite a pickup in consumer demand, and the central bank expects to keep its policy of using interventions to prevent the crown firming past the 27 to the euro level in place throughout next year to keep monetary conditions loose. Rate-setter Jiri Rusnok told Reuters he had seen nothing yet to change that view. On the economy, he said growing domestic consumption would be a bigger driver in the future, offsetting a lesser impact from export growth.
“We are experiencing a recovery but the recovery is relatively fragile,” he said on the sidelines of an economic conference in the Czech Republic’s industrial northeast. “Exports will drive us less than we have become used to in recent years and domestic consumption will drive us a little bit more, and let’s hope also investments.” The central bank launched its weak crown policy almost a year ago to battle deflationary risks by boosting import prices, a move that increased slack consumer demand by prompting shoppers to stop waiting for costs to fall. A center-left government that took power in January is also reversing years of austerity and looking at more investments to help the economy. The revival of domestic demand comes as the euro zone, central Europe’s most important trading partner, struggles with weaker growth and slow inflation. While the Czech economy grew by 0.3 percent on a quarterly basis in the second quarter – a fifth straight rise – analysts see growth running into headwinds from weaker trade. Rusnok, who joined the central bank in March, said the troubles in the euro zone were still an uncertainty for the economy.
“It is primarily Europe and especially the euro zone,” he said when asked about risks. “For us, the direct impact of the Russia-Ukraine problem is tiny.” The central bank had already delayed the expected exit from its unconventional policy twice before this year but left its commitment in place at its last meeting on Sept. 25. “We will continue with our monetary policy settings (and) that … will continue at least through all of next year,” Rusnok said. The bank’s latest outlook sees inflation returning to a 2 percent target by the end of 2015. It has highlighted lower inflation and growth projections in the euro zone, along with lower global oil and food prices, as anti-inflationary factors.
The U.S. Commerce Department on Tuesday confirmed duties on imports of specialized steel from the Czech Republic, after finding the goods were being sold too cheaply in the United States. In Commerce’s final decision, grain-oriented electrical steel imports, mainly used in large and medium-sized electrical power transformers, will face duties of up to 35.93 percent – higher than the preliminary decision. The complaint was lodged by AK Steel Corp, Allegheny Ludlum Corp. , (IPO – ALGL.N), and the United Steelworkers union. Just over $9 million worth of the Czech steel was imported in 2013. The U.S. International Trade Commission is due to make its final decision in the case by Nov. 6.