The spread of the SARS-CoV-2 virus causing the disease called COVID-19 entails economic consequences for the economy of the Czech Republic that have been made worse by government measures designed to counter the spread of the virus. The expected economic collapse of the Czech economy is historically unprecedented and exceeds the impacts of the global financial crisis of 2009 and the European debt crisis of 2013.
The complications for the Czech Republic’s very open economy are a combination of internal shock, related to closure of some premises and halting of production, and external shock, related to interference with global suppliercustomer chains and a massive fall in foreign demand. There are also threats in the form of a collapse on the labour market, an escalation of financial imbalances, an increase in the number of bankruptcies of non-financial companies, and defaults on loans by companies and households. In response to these threats, the government adopted a number of measures that were inspired by similar measures abroad.
In order to quantify the impact of the fall in economic activity and the adoption of economic measures on public budget deficits, the Office of the Czech Fiscal Council released a study about Fiscal Costs of the COVID-19 Pandemic in the Czech Republic. Given the dynamic developments brought about by the “coronavirus” crisis, regular updates of the impact of newly adopted measures on the economic balance and projections of public institutions sector debt were required. Therefore the OCFC released updated estimate of the consequences of COVID-19 for the economic balance and development of public institutions sector debt – describing the situation as at 5 May 2020. The update shows that the deficit of the Czech Fiscal Council could reach more than CZK 300 billion in 2020.