Czech GDP to fall by 10-12% over new restrictions

Czechia's GDP may fall by 10-12 percent this year instead of the 8 percent forecast by the Confederation of Industry a month ago due the latest series of coronavirus restrictions, the Confederation of Industry said in a press release.

The economic contraction will depend on the longevity and extent of the measures, and on how stable the situation becomes, the confederation added. The government today decided to impose additional restrictions to curb the spread of the coronavirus. Come Thursday, roughly half of all retail stores will have to close temporarily.

The measure will not apply to essential goods stores, such as food and drug stores, and selected operations including florists, opticians, cloth shops and haberdasheries. Provision of services will also be limited, with the exception of repairs, for example. The measures should be in place until November 3, when the state of emergency will expire.

The closure of stores and other establishments will have an indirect effect on other sectors and their suppliers as well, for example in the food industry, confederation head Jaroslav Hanak said, adding that the measures will spill over to the manufacturing sector.

Businesses, mainly those active in services, are seeing the worst-case scenario come true, Chamber of Commerce head Vladimir Dlouhy said. Shopping centres would be able to ensure high safety and hygiene standards even if all stores remained open, said Jan Kubicek, chairman of the International Council of Shopping Centers' Czech committee.

Shopper numbers have been falling in recent days since the previous series of measures was announced and there is no reason for such draconian measures, Tomas Micek of consulting company CBRE said. The closure of hotels is logical given the situation, but the government should renew the COVID ubytovani (accommodation) scheme or loan moratorium, the Czech Association of Hotels and Restaurants (AHR) said in a press release.

Most hotels and guest houses are currently running at 4 percent capacities at most given the previous restrictions on leisure activities, restaurants and conferences, the association added. Car dealerships will move their activities online again but the restrictions will result in another market drop, which has so far been expected at 25 percent in annual comparison, a CTK poll shows.The services sector accounts for 62 percent of Czechia's GDP, with industry making up 30 percent, construction 6 percent and agriculture 2 percent, Dlouhy said.

Source: ČTK