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Confidence in Czech economy falls, everyone’s pessimistic

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The confidence in the Czech economy among entrepreneurs and consumers fell by 4.4 points to 82 points in November compared to October results. According to the Czech Statistical Office, the most serious decrease was recorded in the entrepreneurial sector which was affected by the COVID-19 restrictions.

The business indicator fell to 81.7 points while the consumer one fell to 83.1 points. Jiří Obst, head of the CZSO business cycle survey department, stated: “The current situation still raises great concerns about the deterioration of the overall economic situation.” The number of people who are afraid of unemployment is also growing significantly, Obst added.

The pessimistic mood for the Czech economy started to spread again due to the second wave and anti-epidemic measures. Petr Dufek, the ČSOB analyst, explained that the pessimism among people is the result of “the fear of unemployment and the associated threat of a deterioration in their financial situation.” The current condition is as negative as the mood during the first wave in spring.

Entrepreneurs’ confidence dropped in every sector. The trading indicator fell by 5.7 points while in the customer service it dropped by 6 points. People feel more negative about the future in three months.

Industry entrepreneurs’ rate also dropped by 3.6 points. Obst added that it’s mostly affected by the low demand. Entrepreneurs are waiting for the decline in the investment of about ten percent. In 2021, there might be a small growth of two percent. However, they will use it for upgrading the already existing facilities rather than investing in new technologies.

Michal Brožka, Komerční Banka economist, thinks that the indicators might slightly grow since the pandemic situation is solving gradually.

“In addition, leading indicators of neighboring countries are declining,” Brožka added.

The aggregate indicator of confidence in the Czech economy was usually around 100 points since March 2014. From January 2020 it began to decline. Besides, in March, the coronavirus lockdown affected the economy, as well. The restaurants, bars, and services had to close. In April the indicator dropped lower than 80 points. The last time it was as low was during the economic crisis in 2009.

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