“The measures taken by the Czech Republic’s government during the pandemic were good and quick, but the discipline people have shown helped with the situation as well,” says Jan Spacil, Managing Partner at Deloitte Legal in Prague. “Various other countries that didn’t work as quickly later had to impose much stricter measures.”
As a result, Spacil says, things are “getting back to normal” in the Czech Republic, but he says the strong decline of the economy is very visible. “From a statistic point of view, the situation is even worse than what pessimists thought it would be,” he says. “I think we aren’t yet able to determine the full scale of the harm the pandemic may have caused, but there is an obvious rise of unemployment, which, before this, was at a particularly low level in the Czech Republic.”
According to Spacil, only time will tell how successful the measures imposed by the country’s government to help the economy recover will turn out to be. “The current hot topic,” he says, “is companies asking for state compensation as a way to help business run. Legally, it’s a bit unclear whether if the leaders of companies be in trouble if they don’t file a complaint against the state and ask for compensation because they damaged the company in a way. If the company goes bankrupt because of it, they might be liable.”
“Recently-adopted legislation in the Czech Republic mostly focused on measures to combat and recover from COVID-19,” says Spacil. In addition, he says, multiple new laws have been drafted, despite claims by the opposition that they are aimed solely at improving the position of Prime Minister Andrej Babis. “Looking at most recent polls, it seems like people think that the biggest issue in the Czech Republic is still corruption,” Spacil sighs.
Spacil describes the country’s economic dependence on its neighbors as it tries to recover from the crisis. “We are looking at the way the situation develops in Germany, as the state of their economy directly influences ours,” he says. “The automotive sector was always important there, and this dependence is visible here too, as the major car manufacturer in the Czech Republic, Skoda, is owned by Volkswagen. We don’t yet know how much they’ll be influenced. We are closely monitoring the situation, and hope for the best. Looking at the long term, this could be a problem.”
In general, though, things seem ok, at least so far. “We have not noticed any major withdrawals in investment,” he says, and most of those that started prior to the crisis are still ongoing.” Indeed, there’s reason for some optimism, he says. ”The issues with China have caused a disturbance in the supply chain and now some investors may focus more on European countries. Ultimately, the Czech Republic may benefit from this.”
And, as elsewhere, there may be positive structural changes that come from the pandemic. “The crisis accelerated a lot of great things,” Spacil says. “Several great projects were started, like digital learning programs, home working – just the digital sector improving altogether. Processes that used to take a couple of years are now quicker, and this is something that will last in the future, too.” He says, “Deloitte colleagues around the world have noticed that the crisis made us skip a couple of years, and generally led to things being done faster.”
Optimistically, Spacil concludes that, in times like these, the only way to get through is to “hope for the best, but be prepared for the worst.”