July 9, 2020 / 12:44 PM / 25 days ago

Czech firms expect slump in orders to continue but no mass layoffs for now: survey

PRAGUE (Reuters) - A third of Czech companies expect orders to drop by 20-40% over the next two months as they continue to feel the impact of the coronavirus pandemic, although they are not yet planning massive layoffs, an Industry Confederation survey showed on Thursday.

More than half of 135 companies across sectors that were surveyed said they had seen orders drop by more than 20% since the pandemic hit the economy.

A lockdown to contain the virus, introduced in mid-March has eased since May. However, the latest survey, taken at the end of June, paints a gloomier outlook than a similar survey in April, when only a fifth of companies said they expected orders to drop by 20-40% in the next two months.

Smaller firms in the latest survey said they expected orders to fall by even more than 40% in the next two months.

The survey found that 77% of companies see a lack of orders as the biggest brake to returning to pre-crisis production levels.

The central bank forecasts the Czech economy will contract by 8% in 2020 due to the shutdown of many businesses and daily life at the outset of the pandemic.

The government expects a record budget deficit this year of around 9% of expected economic output and pledged support for workers and firms, largely through guarantees on loans.

It has also put in a place a scheme to help affected firms cover workers’ wages, which is due to run out in August although the government is debating extending the measure.

In the Industry Confederation survey, 55% of firms did not yet plan layoffs. About 14% have cut staff already while 16% said they would wait until September to see whether the government would extend the wage scheme.

The Czechs had the lowest unemployment rate in the European Union going into the crisis. It rose to 3.7% in June, up from 3.0% in February, although analysts have said it could climb to 5-6%.

Reporting by Jason Hovet; Editing by Susan Fenton

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