Business & Economy Czech Republic News

As Czech economy plunges, unemployment reaches two-year high

Prague, Czech Republic – As the Czech economy takes a deep plunge due to the Covid-19 pandemic and weeks-long lockdown, unemployment surges in a rare hike.

EU enters recession, Czech economy takes a plunge

According to the European Commission’s Spring Forecast released a few days ago, the Czech Republic will be in recession in 2020 and see its GDP drop by 6.2% due to the coronavirus crisis. Growth should pick up again quickly and reach +5% in 2021.

A fall in domestic production and investment, as well as the reduced demand from its main trading partners – particularly Germany – have taken a toll on the export-driven Czech economy, although the EU’s forecast is slightly more optimistic than the IMF’s, which expected a 7.5% Czech GDP contraction in 2020.

As a whole, the EU’s economy should drop by 7.4% in 2020 (before bouncing back by 6% in 2021) and unemployment reach 9% in the bloc.

“This is a symmetric shock”, said Commission vice-president Valdis Dombrovskis, “all EU countries are affected and all are expected to have a recession this year”. The GDP drop, however, will significantly differ from one country to another, from -4.3% in Poland to more than twice as much in Greece.

Most recent surveys show that the fear of an economic crisis in the Czech Republic trump concerns regarding the disease or the outbreak itself.

Unemployment rises, but remains comparatively low

As the country slowly enters recessions, unemployment in the country increased to 3.4% in April, the highest level since March 2018 according to the Czech Labour Office. A study by the Behavio research agency found that approximately 11% of Czechs lost their jobs in April due to the government lockdown and measures to contain the spread of the virus.

The Czech Republic has, for the past several years, consistently had the single lowest unemployment rate in the European Union, hovering between 2% and 3% of the working-age population. As its economy free-falls, the European Commission expects Czech unemployment to increase to 5% by next year, a comparatively low level compared to the situation in many other EU member states.

Although the number of unemployed people is expected to further increase as the short and medium-term impact of the pandemic starts to bite, particularly in the most hard-hit sectors, analysts agree that the crisis should be short-lived.

In April, there were still more vacant jobs waiting to be filled in the Czech Republic (around 330,000, according to the Labour Office) than unemployed people (more than 250,000)