Despite negative growth during 2012, analysts are confident that the Czech and Slovak GDPs will recover in 2013, with Czech GDP reaching 3% and Slovak reaching over 3% in 2016.
According to Roman Krajcir, Managing Director at Slovakia-based Promifinance, who was speaking to over 120 delegates at the ICSC Czech and Slovak Retail Real Estate Conference, consumers lack confidence and need more wages to propel them to go and spend, and Czech consumers, reputed to be the most conservative in the world, are not likely to increase their spending until the economy is clearly stabilizing.
He added: "In the Czech Republic the economy is struggling with negative household spending and falling exports. Though the automotive industry, the main driver of the economy, is up 25% Government austerity plans and tax measures in both the Czech Republic and Slovakia exacerbate uncertainty of corporate and negative trends in domestic demand."
However, even though the Czech sales are falling, the market remains an important mid-size, larger volume European market.
While Slovakia mirrors the Czech market in many ways, its GDP will decelerate this year from 3.3% to 1.9% before continuing to pick up in 2013 led by stable export growth.
With bank credits and financing hard to find at decent rates, this will have a negative impact on new investment and Slovakia in particular is not a priority market for many brands. However, for Slovakia, the one shining sector remains automotive which grew at the phenomenal rate of 56% in April year-on-year after an average of 29% growth the previous quarter.
Foreign direct investment into Slovakia and the Czech Republic forms 58% and 61% of GDP respectively, according to Eurostat, a significant drop since 2009 with most investment coming from already established companies, however with a planned shift of production by Western countries into cheaper locations, the prospects for new investment are improving.
Rich Hay, Chair of the ICSC Czech Slovak National Committee and Head of Retail in the CEE for EHL Management, said: "The Czech and Slovak republics will remain foreign direct investment targets because they're established, close to western markets and have good infrastructure compared to other CEE countries. All that's needed is an element of confidence and with the cyclical nature of this business, I predict this won't be too long in becoming a reality."
Source: Nicky Godding