Respekt in English•8. 11. 2007•6 minut
With the crown forever
Czech exporters are raising hell again. They say the crown is so strong it hurts not only their profits but the whole economy as well. The same situation has been repeating itself for at least the past 10 years.
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Czech exporters are raising hell again. They say the crown is so strong it hurts not only their profits but the whole economy as well. The same situation has been repeating itself for at least the past 10 years. After the 1997–98 crisis economists and journalists alike predicted the domestic currency would vigorously strengthen, and exporters called on the central bank and government to weaken the exchange rate. The last massive wave of such calls arose five years ago, when hundreds of companies backed the so-called Trutnov Appeal demanding state intervention in the exchange rate. Back then the rate was about CZK 30/EUR; today it is about CZK 3 stronger.
The firming of the currency has always been an engine of corporate restructuring. Exporters complain, but in the end they always found ways to offset the stronger crown by saving elsewhere, in an effort to keep their prices competitive on foreign markets. Since then the situation has changed significantly. Most exporters now compete not only via low prices but also via high quality. This is partly thanks to the strong crown, which forced them to increase productivity. When setting prices for exported wares, firms still have enough space to maintain current prices, if they are willing to accept a certain decline in their profit margins.
A fine academic riddle
We can't rule out the possibility that the exchange rate is approaching a level at which further strengthening will abrogate the…
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