Petr Sklenář

Main economist of J&T Bank

From the

Sometimes, he likes to exaggerate and say he just makes a cup of coffee and opens the Financial Times at work. Petr Sklenář, a graduate from the Faculty of Economics and Administration, actually deals with analyses of financial markets in his professional career. At present, he analyses data as the main economist of J&T Bank.

What is really the job of the main economist?
I work in an analytical team, which tries to monitor the events on financial markets. I am personally responsible for macroeconomical analysis, so my work focuses on the analysis of data such as GDP, inflation, interest rate or the Czech crown exchange rate. At the same time, I monitor the bonds and commodities market. In practice, it means I simply read most of the day. Domestic press highlights, Bloomberg news, analyses and comments of other banks as well as selected web portals. I sometimes like to exaggerate and say I just make a cup of coffee at work in the morning and open the Financial Times.

So when you read all the data, what do you then do with your analysis?
When e.g. data about the Czech GDP for the first quarter are published, I read the report and data of the statistical office and write a comment to my clients. In addition to this systematic work, a sort of screening and rummaging through the staked out area, which includes both regular and irregular comments to my clients and colleagues, I also deal with ad hoc projects, ranging from client lectures to communication with media and writing articles.

The bank you work for is private. What does that actually mean and what is the difference between your bank and an “ordinary” bank?
J&T Bank as a private bank focuses on more solvent clients. Our approach to clients can be divided into three areas: to help them earn money, to protect their property and to help them enjoy their money too. In our bank, private banking services begin at ten million crowns; clients with a high future potential are offered premium banking services, which include selected services, such as investments, but in smaller financial volumes. For clients who want to try the quality and comfort of services of a private bank, we have a service offering fixed term deposits and selected investment opportunities, which is available from five hundred thousand crowns.

You started out your professional career in a company, which focused on securities and commodities trading. Analysis and prediction of market development are still a part of your work. Were you attracted by this area as early as during your studies?
Yes, I was already interested in analytical work and mathematical methods in economics during my studies at the faculty. I daresay I was lucky and fulfilled my professional dream: I have my dream job. An analytical team is something like technicians in a Formula One team, a trader or portfolio manager being the pilot in this case.

How difficult is it to predict the development of financial markets, knowing that your recommendations will influence the investments of the bank and its clients? Are your estimations pessimistic or rather optimistic?
Each job has its pros and cons. A certain liability falls into the second category. But I have to say that the final decision, and thus liability, rests on other people. An analytical team is something like technicians in the Formula One team, a trader or portfolio manager being the pilot in this case. In market analyses, I consider myself a conservative realist, but my colleagues usually blame me for being very sceptical and pessimistic. So it depends on the point of view.

Economists are not infallible in their predictions; challenging the theory of Kenneth Rogoff and Carmen Reinhart about the negative impact of the high public debt-to-GDP ratio on economic growth can serve as an example. On the basis of their calculations, many countries proceeded to austerity measures and thus probably protracted the economic crisis.
Of course, economists are not infallible and make mistakes like anyone else. The aforesaid study contained elementary mistakes; on the other hand, the relation that higher debts correspond to lower growth remained even after the modifications. Moreover, other research took account of both government debts as well as household debts, and showed similar conclusions. They said that from a certain level of indebtedness, the stimulation of growth by further debt is not efficient in the long term. One of the main reasons of the current crisis is that household, companies or governments, or even worse – all of these sectors, had been overburdened with debts, which ceased to be economically sustainable.  The economic recession is a consequence of the fact that part of the consumption was increased by this unsustainable debt and must be reduced. Therefore, the statement that a prolonged recession results from insufficient access to loans is beyond comprehension. As if we forgot what the original cause of the problems is – the unsustainable volume of debt.

Despite that, the Czech Government has changed its rhetoric in recent months, planning to support the economy instead of budget cuts. Do you think it is not a good solution?
If someone suffers from extreme obesity, and chooses a diet with even more calories, arguing that he or she needs to be strong enough to lose weight, I think everyone will consider it as nonsense. The recent continuing recession in Europe has aroused voices that budget cuts do not solve anything and we need to look for “pro-growth investment”. It is the same as if I complain of hunger while losing weight. Any pro-growth measures actually mean a higher debt because state budgets are always in deficit. In addition, these measures do not work and show to be ineffective. For example, the U.S. Government shows a deficit of 7 to 10% of GDP in order to “force” GDP growth by 2%. Common sense says this is not sustainable in the long term. Our country’s companies, households and government are not overburdened with debts, the banking sector does not face any problems, and there are no significant bubbles or imbalances in the economy.

What do you think could support the economic growth of the Czech Republic then?
Perhaps mainly calm and no “pro-growth” measures. Both households and companies jointly answer that the instability and unpredictability of further development is the main problem. But in fact, our country’s companies, households and government are not overburdened with debts, the banking sector does not face any problems and there are no significant bubbles or imbalances in the economy. On the other hand, further development in the Eurozone is unclear; the economic policy makes a U-turn every year. For example, last year after Christmas, Czech companies did not know what the VAT rate would be starting 1 January. This is not how investment incentives and savings reduction should look like. Paradoxically, the best “pro-growth” measure might be an effort to avoid vigorous changes as much as possible and only to increase the flexibility of the economy. I would recommend it to creators of economic policy not only in the Czech Republic but also anywhere in Europe.

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