News round-up

15 - 21 December 1997


The Czech Statistical Office reported that GDP rose by 0.8 per cent in real terms in the third quarter of 1997, and 1.1 per cent for the first nine months. The Consumer Price Index rose in the third quarter by 2.2 per cent over the second quarter, and due to the higher inflation and to a slowdown in the growth of wages, individual household consumption fell by 1.0 per cent. The trade deficit stood at 20.4bn crowns at the end of the third quarter, while foreign trade was mainly influenced by the fluctuations in the crown's exchange rate. Meanwhile exports continued to grow at a steady pace in the second and third quarters, although imports slowed down from 110.5 to 102.4 per cent. The significant decline in the growth of imports and the surging demand for domestic products substantially contributed to GDP growth.

In its biannual forecast released on 15 December, the Organisation for Economic Cooperation and Development (OECD) projects a slowdown in the growth of GDP in the Czech Republic, from 4.4 per cent in 1996 to 0.9 per cent this year, with an estimated growth of 1.7 and 1.9 per cent in the next two years respectively. The report also forecasts growth in unemployment to 4.4 per cent in 1997 and to 5.1 per cent and 6.3 per cent in 1998 and 1999. Due to the reduction in demand, the OECD expects the deficit on the current account to reduce moderately, to 6.9 per cent of GDP in 1998 and to 5.7 per cent in 1999, down from 7.9 per cent this year.

According to the Bank of Estonia, the current account deficit in the third quarter of 1997 was 1.3bn kroons (US$91.5m), or 9 per cent of GDP. The Bank of Estonia gives a growing foreign trade gap as the main reason for the deficit; imports grew in the third quarter by 6 per cent, against a 4 per cent increase in exports.

The Estonian Parliament approved the 1998 state budget of 14,976m kroons ($105.4m), 500m kroons larger than the draft budget prepared by the government. 54m kroons will be channelled into a stabilisation fund which, with this year's surplus revenues and income from privatisation, will total 1.2bn kroons.

In Latvia the foreign trade deficit grew to 466.133m lats ($77.7m) in the first ten months, as Latvia's export increased by 22.5 per cent over the same period last year; imports rose by 24.9 per cent from last year. In total value terms, export and import figures were 653.081m and 1,013.999m lats respectively.

The Lithuanian Prime Minister, Gediminas Vagnorius, said that he will adopt and support a constitutional law which will bar a deficit state budget in the future.The present Lithuanian government had planned to adopt a balanced state budget in the year 2000, but this year's budget deficit of 697.9m lits, or 1.9 per cent of GDP, and projected 695m lits deficit for 1998 ( 1.6 per cent of GDP), make it possible to have a balanced budget in 1999.

In its latest biannual report released on 15 December, the Organisation for Economic Co-operation and Development (OECD) projects that the Polish economy will expand by 5.6 per cent this year, slowing down to 5.4 per cent in 1998. The report stated that the general economic situation in Eastern Europe has improved, but the region faces new challenges from unstable global markets in 1998.

In its report on 15 December, the Central Statistical Office (GUS) said that in November CPI rose by 1.2 per cent from October, and that inflation for the first eleven months of this year was 12.1 per cent against 17.1 per cent in the corresponding period last year.

GUS also reported that more companies posted a net profit in the first ten months of the year, bringing the total number of profitable companies to 66.9 per cent, compared with 65.2 per cent a year ago.

On 15 December the Ministry of Finance reported that, after the first eleven months of this year, Poland's budget deficit was nearly 5,239m zloty ($1,470m). Meanwhile, treasury income in the January-November period was 107,660m zloty, or 93.3 per cent of the amount planned in the budget for 1997. In the same period, expenditure reached 88.3 per cent of the planned 127.9bn zloty.

After visiting Poland for a meeting with Deputy Prime Minister and Minister of Finance, Leszek Balcerowicz, Gerard Belanger of the International Monetary Fund said that Poland needs to reduce domestic demand and its current account deficit. He stressed that a high current account deficit may lead to a crisis similar to that of South Korea.

On 15 December Poland signed an agreement with the World Trade Organisation (WTO) on the liberalisation of financial services, joining 71 of the WTO's 132 members who have already signed the accord. Jaroslaw Stypa, Director of International Economic Integration at the Ministry of Finance said that the agreement matches the liberalisation schedule defined by the OECD. The agreement will come into effect in 1999 and will mainly concern banks, insurance companies and brokerage houses.

Germany's Selgros Cash & Carry, set up by OHG Fegro & Selgros, announced a 100 per cent increase in investments in Poland by the year 2000 . The company will spend 500m zloty ($142.8m) on a chain of 10 supermarkets in the largest Polish cities.

Russia's first deputy Vice Prime Minister, Anatoly Chubais, confirmed that before 1st January 1998, a total of 5,900bn roubles ($995m) will be released from the Russian federal budget to settle the arrears on salaries to the staff of the budget dependent institutions.

According to the governor of the National Bank of Slovakia, Vladimir Masar, the deficit to the current account of the balance of payments was 36.9bn crowns ($1.1bn) for the first nine months of the year, rising by 2.1 bn crowns in September over August. Foreign trade showed a deficit of 43.9bn crowns for the first eleven months of the year, down from 48.82bn crowns for the same period of time in 1996. Exports were 274.177 bn crowns, up 24.668bn crowns (9.9 per cent) against 1996, while imports were 3,189.077 bn crowns, up by 13.681bn crowns (4.5 per cent) from the same period in 1996.


According to an agreement signed in Moscow on 17 December, Agroprombank of Kazakhstan merged with the Russian SBS Agro group. Agroprombank is the leading financial institution in Kazakhstan, with about 250 branches and offices.

Gdansk Shipyard in Poland confirmed the formation of a consortium that wants to buy the shipyard. Andrzej Wiercinski, the shipyard's trustee, said the consortium includes the Solidarity for the Shipyard Fund, Gdynia Shipyard SA, Pekao SA and Nederpol. He also mentioned that the shipyard is in talks with other potential investors, including Daewoo and two Greek companies. The shipyard's debts are estimated at 200m zloty ($57.1m).

In Russia, Norilsk Nikel, a joint-stock company and one of the world's leading producers, has signed a short -term loan agreement with a group of western banks for a total of $75m. The loan agreement is managed by ING Barings, with settlements to be handled by Oneximbank. The loan will be secured by earnings from the platinum group of metals.

The Russian oil company, Yukos, raised $1bn from western banks in the first week of December. Most of the money, which Yukos used to acquire Eastern Oil, another Russian oil company, was arranged by a consortium of foreign investment banks led by Credit Lyonnais and including Merrill Lynch and Goldman Sachs.


By the end of 1997 Latvia's State Property Privatisation Fund expects to receive 40.7m lats from privatisations carried out during the year. By law the fund has to receive about 42m lats, with the basic state budget receiving 21.5m lats of the fund's resources. 297 auctions of the state property were concluded in 1997, only three agreements short of target.

Latvian Privatisation Agency reported a forthcoming privatisation of a cargo shipping company, Rinuzi, to a strategic investor. Rinuzi, which is 45 per cent state owned, will be turned into a stock company with a share capital of 4,187,000 lats. Under the new scheme the strategic investor will have to invest 6.5m lats in the company's development within the next three years.

On 15 December the press office for the Ministry of European Affairs announced that an international consortium led by Coopers & Lybrand will advise the Lithuanian government on the privatisation of the Lithuanian sea shipping company LISCO. The consortium also includes Baker & McKenzie, Eurogal Surveys, Tebodin, Bishop & Robertson Chalmers and Société Generale. It is expected that the company will be sold off within eight months. LISCO is 80 per cent state owned.

The Polish Cabinet for Economic Affairs, KERM, approved a new plan for the privatisation of the PKO SA bank. Under the new scheme 50 per cent of the bank's shares will be offered for sale, including 35 per cent to be sold to a strategic investor in the third quarter of 1998 and 15 per cent to be sold to smaller investors in the first half of 1998. The further 15 per cent will be offered to the bank employees, 5 per cent will be used as a reprivatisation reserve and the remaining 30 per cent will be credited to the reformed social security system fund.

According to Sergei Karpov, President of the Moscow Central Stock Exchange (MCSE) in Russia, the Board of Directors at MCSE passed a decision for associated membership of the Association of the Futures Industry (AFI) of the United States, the most authoritative organisation in the futures industry. The status of an associated member of the AFI will grant the MCSE access to information about the current state of the stock market.

A branch house of S.A.& K.Group Brockerage was the first ever Russian company to receive a licence for operations in the British securities market. The licence was granted by the Securities and Futures Commission, Britain's financial regulatory authority.


In Central Europe, following the signing by Poland, the Czech Republic and Hungary, of a protocol of their accession, on 18 December the General Secretary of NATO, Javier Solana, stated his hope that the citizens of the three countries were aware of how important this moment was; that it was particularly important that the NATO extension be examined in political categories and not financial ones. The ambassadors of the three countries will participate in a special session of the alliance's supreme body, the North Atlantic Council and thereafter, in most of the alliance's meetings.

The outgoing Czech Prime Minister, Vaclav Klaus, was given a resounding vote of confidence by his Civic Democratic Party (ODS), despite the collapse of his centre-right government. Josef Lux, leader of the Christian Democrats and one of the ODS's former partners, has been commissioned by President Vaclav Havel to form a new government. However, it is unlikely that there will be elections in the middle of next year.

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