External trade - 1. quarter of 2005

            External trade¹ in the 1st quarter of 2005, compared to the 1st quarter of 2004, was characterised by:

            - higher turnover by 12.3%. External trade turnover increased by CZK 92.7 billion y-o-y and reached CZK 844.6 billion. Exports, which grew by 14.1% (CZK 53.1 billion) y-o-y, had a more important share in the increase (57.2%); imports grew by 10.6% (CZK 39.6 billion) and accounted for 42.8% of the increase. However, completely different development in individual months accompanied by gradual slowdown of growth rates was behind the overall dynamics of exports and imports in the 1st quarter of 2005. Lower growth rates of external trade will probably prevail in 2005 (due to the high comparing base from March 2004). A higher growth of exports than imports was characteristic for all months of the 1st quarter of 2005. External trade valued in EUR and USD showed higher growth rates in the 1st quarter of 2005. Owing to the appreciation of CZK against these currencies, exports and imports in EUR grew by 24.9% and 21.1% y-o-y, respectively, and exports and imports valued in USD rose by 31.1% and 27.1%, respectively;

 

- significant improvement of the trade balance. Surplus reached CZK 14.7 billion and grew by CZK 13.4 billion y-o-y. This was the fifth (and highest) surplus of quarterly balance² achieved in the period of existence of the Czech Republic. Trade balance was active in all months of the 1st quarter of 2005. By group of countries, balance of external trade improved with all groups of countries, with the exception of CIS³ countries; from the point of view of commodity structure, balance improved in all sections of SITC, except crude materials, inedible, and mineral fuels and miscellaneous manufactured articles;

            - external trade by group of countries having a slightly weakening share of developed market economies in total exports, which is, however, still predominating (91.6%), and strengthening position of these economies in total imports (81.6%). A positive aspect is higher share of developing economies, CIS countries and European transition economies in total exports. The position of developing economies and other states⁴ in imports weakened;

            - external trade by commodity structure recording increases (though differentiated) in exports and imports in all sections of SITC. Above-the-average increases were seen in exports of agricultural and food crude materials and products, chemicals and related products and machinery and transport equipment. Above-the-average increases in imports were recorded for agricultural and food crude materials and products, manufactured goods classified chiefly by material, miscellaneous manufactured articles and, in particular, for crude materials, inedible, and mineral fuels. The last-mentioned section of SITC concentrated the highest deficit of external trade with a considerable y-o-y deterioration.

         Development of external trade in the 1st quarter of 2005 was influenced, inter alia, by:

- prices of external trade⁵. Changes in export and import prices were markedly affected, in addition to the changing prices on world markets, by the development of exchange rates of CZK against EUR and USD. In January to March 2005, CZK strengthened by 9.5% against EUR and by 14.9% against USD, both on average y-o-y. In January to February, export prices grew by 0.7% and import prices decreased by 0.8% y-o-y;

-  foreign direct investment (FDI). FDI inward flows were up in 2004, compared to 2003, and reached CZK 114.7 billion. Nearly half of FDI were targeted at manufacturing whose production is largely exported. FDI inward flows continue also in 2005, reaching CZK 20.6 billion in January to February;⁶

            - slowdown of growth of industrial production and sales in industry;

            - lower increase of domestic consumer demand in comparison to the preceding period. In January to February 2005, retail sales grew by 2.5% at constant prices;

            - economic situation in the world and particularly in the states of the Euro-zone. In the 1st quarter of 2005, some indications of economic slowdown occurred in the world (especially in the biggest world economy – the United States), the EU member states being no exception. After a decrease of GDP in the 4th quarter of 2004, the main trading partner of the Czech Republic – Germany – reduced its estimate of economic growth to 0.7% in 2005.

A closer look at the development of external trade in the 1st quarter 2005 shows that:

- exports grew to all groups of countries (except other states). High dynamics were reported for exports to CIS countries, developing economies and European transition economies. Prevailing part of the increase in exports (although under a below-the-average rate of growth) took place due to exports to developed market economies (CZK 44.3 billion), or the EU25 (CZK 40.7 billion). Also exports to other developed market economies (particularly to the United States) developed favourably. The total growth rate of exports to the EU25 reflected various dynamics of exports to individual states. Exports to the majority of states recorded above-the-average growth (e.g. Slovakia, France, Poland, Hungary, Belgium, Spain and Sweden), less dynamic were exports to Germany, Italy and Austria, and decreases were recorded mainly for exports to the Netherlands and the United Kingdom. Among exports to non-EU states, increases in exports to Russia, the Ukraine and Romania, as well as a sharp decrease in exports to China (-38.3%), are worth mentioning;

            - imports were higher y-o-y from developed market economies, European transition economies and CIS countries, whereas imports from developing economies and in particular imports from other states were down. An above-the-average growth was reported for imports from developed market economies, caused above all by higher imports from other developed market economies (mainly from the United States by CZK 8.7 billion). Dynamics of imports from the EU25 were below the average and varied considerably from one EU25 state to another. Highly above-the-average increases were recorded for imports from the Netherlands, Slovakia, Poland and Spain, while below-the-average increases were apparent for imports from Germany, France, Italy, Austria and the United Kingdom. As to imports from non-EU states, particularly lower imports from China and higher imports from Russia and the Ukraine should be mentioned;

            - balance of external trade was a result of lower deficit of trade with developing economies (by CZK 7.2 billion) and other states (by CZK 3.3 billion), higher surplus of trade with developed market economies (by CZK 6.4 billion) and European transition economies (by CZK 1.2 billion), and higher deficit of trade with CIS countries (by CZK 3.9 billion). The biggest surplus was concentrated on developed market economies (CZK 54.9 billion) or the EU25 (CZK 77.8 billion), whereas balance of trade with other developed market economies was passive by CZK 20.4 billion.

Active balance of trade with the EU25 was by CZK 15.0 billion higher y-o-y. The highest increases occurred in trade with Germany (by CZK 7.1 billion), France (by CZK 5.4 billion) and Slovakia (CZK 3.4 billion). Balance of trade with the Netherlands and the United Kingdom deteriorated considerably y -o-y. Among non–EU25 states, high deficit (though lower y-o-y) was run in external trade with China (CZK 16.2 billion, compared to CZK 19.8 billion), Russia, the United States and Japan;

 

- in commodity structure of external trade:

             . machinery and transport equipment saw an above-the-average growth of exports (15.3%) and thus an increase of share in total exports (from 50.5% to 51.1%). Growth of exports by CZK 29.1 billion accounted for 54.9% of increase in total exports. On the other hand, imports of machinery and transport equipment recorded the lowest y-o-y growth (by 4.9%) among all sections of SITC, i.e. their position in total imports weakened (from 42.3% to 40.1%). Surplus of external trade in machinery and transport equipment reached CZK 52.9 billion and grew by CZK 21.3 billion y-o-y. Surplus was up especially in trade in motor vehicles (by CZK 9.2 billion) and general industrial machinery and equipment (by CZK 7.0 billion);

            . manufactured goods classified chiefly by material reported below-the-average dynamics of exports, i.e. weakening position in total exports (from 23.2% to 22.7%), and above-the-average growth rate of imports, which led to a higher share in total imports (from 20.9% to 21.2%). In spite of that, surplus of external trade in these products slightly grew y-o-y (from CZK 9.0 billion to CZK 9.8 billion);

            . miscellaneous manufactured articles and commodities and transactions not classified elsewhere in the SITC saw a lower surplus (from CZK 4.9 billion to CZK 1.3 billion) due to a higher growth rate of imports (15.2%) than growth rate of exports (5.3%);

            . chemicals and related products recorded a high relative increase of exports (21.6%) under a simultaneous below-the-average growth of imports (6.1%). As a result, deficit of external trade in these products decreased from CZK 22.0 billion to 19.9 billion y-o-y;

            . crude materials, inedible, and mineral fuels reported the highest dynamics of imports (30.0%) among all sections of SITC and below-the-average dynamics of exports (12.2%). This development, which was strongly influenced by prices of mineral fuels, raised deficit in this SITC section from CZK 15.3 billion to CZK 23.5 billion y-o-y (from CZK 11.2 billion to CZK 15.9 billion in trade in petroleum and petroleum products and from CZK 8.3 billion to CZK 11.4 billion in trade in heating gas);

            . agricultural and food crude materials and products saw the highest growth rate of exports among all sections of SITC. Higher growth rate of exports (34.6%) than growth rate of imports (16.2%) affected an improvement of deficit (from CZK 6.9 billion to CZK 5.9 billion).

 

¹ All the data are at current prices. The 2004 data are updated referring to 28 February 2005 closing date, the January 2005 data are preliminary referring to 28 February 2005 closing date, the February 2005 data are preliminary referring to 29 March 2005 closing date and the March 2005 data are preliminary referring to 28 April 2005 closing date.

² Surplus of external trade was reached in the 1st and 2nd quarters of 1993 (CZK 12.1 billion and CZK 0.9 billion, respectively), in the 1st quarter of 1994 (CZK 0.2 billion) and in the 1st quarter of 2004 (CZK 1.2 billion).

³The Commonwealth of Independent States.

⁴ China, North Korea, Cuba, Laos, Mongolia, and Vietnam.

⁵ Import and export price indices in the CR are published later than data on external trade of the CR.

⁶ According to preliminary data of the CNB from February 2005 monthly balance of payments compiled in compliance with methodology of the ECB.