Pandemic reduces firms' revenues, profits and orders - survey

The coronavirus pandemic has reduced firms' revenues, profits and orders, and increased economic uncertainty, with the fast wage growth grinding to a halt, a Q2 survey conducted by the Confederation of Industry in cooperation with the Czech National Bank (CNB) shows.

The pandemic hit the Czech economy at a time of slowing growth, said Bohuslav Cizek, head of the confederation's economic affairs department. Czechia's main trade partners were also experiencing an economic slowdown, wages were nearing the top and input prices were rising, he said. The economy kept growing mildly until the coronavirus outbreak and adoption of extraordinary measures, he added.

Firms have downgraded their assessment of both domestic and foreign demand, and their expections of orders for the coming months have also fallen, according to the survey. The current situation is also reflected in a substantial drop in expected corporate investments, Cizek said. Strong inflationary pressures persist and raw material prices have not started going down yet but the labour market situation is calming down compared to the previous quarters.

Wage growth peaked in Q1 and is slowing down, said confederation analyst Vladimir Stipek, adding that the trend is expected to continue in the quarters ahead. Firms are seeking to protect exports from foreign exchange risk, the survey shows. Cizek said almost 60 percent of exports have been hedged, and as many as 15 to 20 percent of domestic transactions are carried out in the euro. Adopting the euro would be a logical step given the strong ties with countries using the currency, he added.

The confederation and the CNB have been running the survey for nine years. Respondents include businesses representative of the Czech economy's structure. As a result, their expectations and views regarding economic development reflect relevant economic trends.

Source: ČTK