Feb. 25 (Bloomberg) -- The Czech Republic probably erased its trade deficit in January, after posting the widest shortfall in a year the previous month, as exports to the European Union surged, a survey of economists showed.

Exports probably matched imports last month, according to the median estimate of 11 economists surveyed by Bloomberg. The nation had a 19.8 billion-koruna ($763 million) deficit in December and a 500 million-koruna shortfall in January 2003. The statistics office will release the report at 9 a.m. in Prague.

The Czech Republic ships 70 percent of its exports to the EU and will join the trading region in May. Companies such as Siemens AG and Taiwan's Hon Hai Precision Industry Co., boosted production at their Czech plants after the nation's exports rose by a fifth in December, the fastest annual pace since April 2001.

``A recovery in the global economy connected with a pickup in demand is apparent,'' said Ivo Nejdl, head of research at Raiffeisenbank AS in Prague. ``Export prices outpacing imports also continued, wiping out the trade shortfall.''

The combined economy of the 15 EU members expanded 0.9 percent in the third quarter, up from 0.6 percent in the previous three months. The Organization for Economic Growth and Development forecasts global trade will rise by 7.8 percent this year, up from 4 percent last year.

Foreign Investment

Foreign investors have pumped about $45 billion into the $80 billion Czech economy since the country split from Slovakia in 1993, seeking a cheap and skilled labor force and a foothold in Europe's expanded marketplace. That's helped Czech producers sell more household appliances, computers and electronic equipment abroad. Exports account for 60 percent of Czech gross domestic product.

Exports to Germany, the Czech Republic's largest trading partner that absorbs 37 percent of Czech goods sold abroad, rose 2.5 percent in the fourth quarter from the third, after contracting 1.4 percent in the July-September period.

``The economy in Western Europe is coming back and we already now can see it in our exports,'' said Jim B. Chang, chief executive officer of Foxconn CZ s.r.o., the Czech unit of Hon Hai, the world's third-biggest maker of electronics for other companies, in a telephone interview. ``I expect at least a 15 percent growth in unit exports for this year.''

Foxconn assembles personal computers for Hewlett-Packard Co., Apple Corp. and Acer Inc., and exports them mainly to Germany, the U.K. and France.

Export-Oriented Output

Hon Hai has invested more than $70 million in its plant in the town of Pardubice, where it employs 3,500 workers. Almost its entire output goes for exports.

Czech goods have become more competitive as the koruna dropped 3 percent against the euro over the past 12 months and as companies shed jobs to pare costs. Industrial production rose 8.9 percent in December from a year ago and 5.8 percent in 2003.

The rising share of finished goods and fewer semi-finished exports allowed export prices to rise faster than imports. In 2003, that cut the 71.2 billion-koruna deficit by 15 billion koruna.

Imports were 0.3 percent cheaper in December from a year ago and 0.3 percent more expensive compared with November, while export prices increased 1.4 percent in a year and 0.4 percent from the previous month.

``Imports should grow due to a recovery in investments'' and ``exports should benefit from a recovery of the global economy and also from the fact that the koruna is unlikely to'' gain against the euro, said Radomir Jac, an economist at Commerzbank Capital Markets AS in Prague. He foresees a 2004 trade deficit of 75 billion koruna.

To contact the reporter on this story: Marketa Fiserova in Prague mfiserova@bloomberg.net

Last Updated: February 24, 2004 19:22 EST