According to a study published by the Czech Statistical Office, the overall size of the public sector in the Czech Republic, in terms of the share on total value added, has declined by 0.4 over last 15 years. Among the individual consumer goods, public producers take a predominant part in the provision of educational services, healthcare or in supplying electricity or gas. Looking at the changes over the period in question, the public sector´s share dropped in the mining and quarrying and electricity, gas, steam and air conditioning supply. On the contrary, the public sector has expanded in water and waste management, agriculture or arts, entertainment and recreation. The decline in the public sector size might lead to several interpretations and macroeconomic implications. It should be stressed that this decline does not imply a decreasing quantity of goods and services supplied by the public sector. Declining share determined by the analysis is only in relative terms. This development thus signifies that a higher share in production is left to the private producers, so it is subjected to the influence of market forces, the study says.
Before 2004, the share of public sector in value-added production had been steadily growing. During 2004, the Czech government approved a privatisation of the mining company OKD, a.s. This transaction led to decrease in the share of the public sector in the industry B “Mining and quarrying”. The drop in the share of public sector was continuing till 2007; that can be explained by a declining share in the industries P (Education) and R (Arts, entertainment and recreation) accompanied by other significant changes. In case of education, the share of the public sector went down by 3 percentage point between 2003 and 2008. This can be accounted for by growing number of students in private universities which grew from 4% in 2003 in total undergraduates to nearly 10% at the end of 2008. Nevertheless, this trend reversed then in connection with the economic crisis and changes in the demographic situation or a gradual satisfaction of deferred demand of middle-aged students.
Next, the study says, there is a striking annual increase in the share in 2009. This sharp increase by 1.4 percentage point can be accounted for by the global economic crisis. In fact, this is one of signs of the beginning of the crisis in the Czech Republic. While the nominal GDP fell by 4.3%, the value added of the public sector grew by 4 percent annually. It implies that the private industry responded more sensitively to the economic situation abroad but a reaction of the public sector was delayed by one year in reaction to the huge deficit of the state budget in 2009 (CZK 192 bill.).
The situation reversed in the year 2010, when the Czech economy recovered in terms of a nominal value-added growth in the private industry (1.7%), while the public sector experienced a fall by 2.7% annually. After 2010, the share of the public sector remained more or less stable slightly above 20% of total value-added, ending up at the level 20.2% at the end of 2014, i.e. by 0.4 percent point lower than the share in 2001. Read more details in the study.
Meanwhile, revenues of Czech 100 biggest companies reached 2.6 trillion CZK and their profits exceeded 188 billion CZK. Among the top five in terms of revenues in 2016 are ŠKODA AUTO, a. s. car producer, ČEZ, a. s. state-owned energy company, AGROFERT, a. s. owned by the Czech Finance Minister, energy producer Energetický a průmyslový holding, a.s. and FOXCONN CZ s.r.o technology company. More details and figures are available here.
22nd February 2018
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