April is criticial for foreign trade, revival to come

The foreign trade data for April are worse than expected, mainly due to a drop in car and car part exports, but the situation can be expected to improve in the forthcoming months and the revival could be faster than after the 2008 global crisis, according to analysts polled by CTK today.

As a consequence of the coronavirus pandemic and related restrictions, Czechia's foreign trade deficit increased by Kc42.9bn to Kc26.9bn in April, and the trade balance was the lowest since the country's EU entry.

"The data was a huge disappointment for the market as the market expected a more or less balanced result," Lubos Ruzicka of Raiffeisenbank said. The closure of borders and shutdowns of companies' operations were reflected mainly in a decrease in surplus of trade in motor vehicles, he added.

Lower surpluses were also seen in trade in electrical appliances and machinery.

On the other hand, lower deficit of trade in crude oil and natural gas had a positive effect.
"In territorial terms, the biggest drop was recorded in exports to Spain, which fell by almost 64 percent month on month. Our exports to Germany decreased by 34.2 percent on the month. The results appear nightmarish. But we can find some consolation in the fact that most of EU economies are returning to normal, as is the border regime. We will not, however, achieve the pre-coronavirus levels sooner than next year," Vaclav France of Deloitte said.

Balance also deteriorated in trade with France but improved in trade with Russia, Japan and Poland, UniCredit Bank economist Jiri Pour noted.

"The drop in the trade balance will affect gross domestic product negatively in the second quarter. The fall of economies is worse than during the previous crisis in 2008," Pour added.
"Thanks to gradual loosening of restrictive measures, the situation will be improving in the months to come, but the threat of a return of the pandemic in the autumn is a great unknown," Pour said.

According to Komercni banka's Jana Steckerova, the worst is over. Results for May will reflect the fact that production in some car plants remained restricted, she added.
"A question also is how fast consumers will return to their usual buying behaviour and how foreign demand will develop," she added.

In times of uncertainty, people tend to put off large investments such as purchases of cars, and this trend can persist, Natland analyst Petr Barton said.
"With regard to the importance of cars in our exports it is possible that monthly deficits will occur much more frequently in the future," he said.

"It is also possible that we will turn from an export economy to an import economy," Barton added.
The Association of Exporters' deputy chairman Otto Danek said he expected foreign trade to continue to be marked by low demand in the forthcoming months. A return to results comparable with last year can take three to five years, he added.

According to a survey conducted by the Confederation of Industry, 82 percent of exporters expect to generate lower sales from exports for the entire year. Over 60 percent of them expect a drop of more than 20 percent, Lukas Martin of the confederation said.
Export-oriented companies will need specific support, such as business missions accompanying state representatives on trips abroad and support of their participation in international fairs and exhibitions, Martin said.

Source: CTK