Annual report 2004 (PDF, 4141 kB) - Unicredit Bank

Directors’ Report
Dear Clients and Business Partners,
Let us present you the Annual Report of Živnostenská banka, a.s. for 2004.
Czech Economy in 2004
In 2004, the economic environment had a positive impact on the whole banking sector in the
Czech Republic. Thanks to revival in Eurozone, the economy continued to grow dynamically
as in preceding year. Gross domestic product (GDP) increased 4 per cent, but still lagged
behind the economic performance of the majority of countries of Central and Eastern Europe.
A positive attribute of the economic development in 2004 was a healthier structure of an
economic growth. While in preceding years the economy had been growing thanks to
households consumption expenditures, last year high demand for investments, and also
exports, pulled the economy ahead. Such development has laid a basis for more robust
economic performance in future and has become an essential precondition for the creation of
new labour opportunities, higher labour productivity and more rapid rise in wages.
Investments into fixed capital accelerated due to revived inflow of direct foreign investments
and improved financial standing of Czech companies. Investments were made; mainly into
the transport infrastructure, manufacturing and non-manufacturing plants owned by foreign
investors and into the housing industry.
Although the dynamic growth in loans to households remained above 30 per cent during the
year, private consumption expenditures have considerably decelerated, mainly due to tax
measures adopted by the Government causing the rise in prices, and also due to a record
unemployment rate at the beginning of the year. Government consumption expenditures
decreased mainly due to savings in costs for material, repairs and maintenance. For the first
time within the last three years, a contribution to GDP growth in the form of net exports was
positive due to rapidly decreasing foreign trade gap. Traditional surplus of imports over
exports expressed in current prices has year-on-year fallen by about CZK 50 billion and
achieved the level of 1993. Foreign trade was improved not only owing to ever reviving
demand from abroad, but also thanks to the fact that the Czech Republic has officially become
a member of the European Union. Foreign trade has improved not only due to an increased
demand from abroad, but also due to membership of the CR in the EU which entailed, among
others, cancellation of customs duties in trade with EU countries and opened the European
market to our exporters. Rapid growth in exports continued despite the strong Czech crown
which has strengthened by 6 per cent last year.
Rising costs of housing, changes in a value added tax and higher excise tax have jointly
contributed to acceleration of inflation. In an effort to maintain the price growth under
control, the Czech National Bank twice increased interest rates. Basic short-term financial
market rate had increased by 50 b.p. to 2.50 per cent, however, an absence of inflation
pressures on the side of demand and the Czech currency rapidly strengthening at the year end
created preconditions for the new interest rate cut.
Due to better collection of tax and due to savings in government consumption expenditures a
state budget gap decreased to CZK 93.5 billion thus being lower by CZK 22.2 billion than
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