Analysis: Prague SMEs will lose up to three-quarters of trillion crowns in productivity due to coronavirus

Prague SMEs play a big role in the Czech economy but have been overlooked in post-coronavirus recovery efforts

Raymond Johnston

Written by Raymond Johnston Published on 30.04.2020 09:11:56 (updated on 30.04.2020) Reading time: 4 minutes

The decline in productivity of small and medium-size enterprises (SMEs) in Prague within two months of the coronavirus crisis can be estimated at about 200 billion CZK. In the next 12 months, a further decline of 400 billion to 560 billion CZK is expected, according to an analysis by PricewaterhouseCoopers for the Economic Advisory Group (PES) of the City of Prague.

PES is supposed to find solutions to support the Prague economy All political parties are represented, regardless of whether they are in the governing coalition or the opposition.

Due to the response to the coronavirus pandemic, many jobs and the economic viability of SMEs and other service providers in Prague are at risk.

“I want to talk openly with the people of Prague. We need to understand the scale of the problem, prepare for it and count on it affecting our lives. Only then can we really do it together,” Prague Deputy Mayor Pavel Vyhnánek (Praha sobě), responsible for finance and buget, said on the City Hall website.

“And it’s not just about Praguers. Although the capital has 12% of the population of the Czech Republic, it makes up 26% percent of the gross domestic product of the entire state. Taxes collected on the capital are redistributed via the state budget. … A large part travels to the regions. When the economy of Prague stops, other cities and municipalities will not have the money either,” he added.

Jiří Pospíšil, chariman of the United Force for Prague political group, said the numbers from the analysis are alarming, and that more leadership on the issue was required from the Czech government.

“The damage turns out to be greater than we expected. Government assistance is cynical, insufficient and intended only for a select few. … Support from Prague can only be complementary [to a larger plan], so we constantly try to persuade the government to help small and medium-size businesses, and prepare a solid plan, as in Germany or Austria,” he said.

Prague-based SMEs make up 40% of the production of this economic segment for the whole country. They also employ 330,000 people. The minimum estimated decline of 600 billion CZK, or more than one-fifth of production, means the loss of tens of thousands of jobs, according to City Hall.

Such large expected losses result from Prague having a specific SME structure. Many of them operate in services in tourism, hospitality or culture. Here, revenues fell to essentially zero.

Prague City Hall said it is currently preparing support for selected industries, and an expert group with representatives of all political clubs agreed on the support of tourism in the total amount of 100 million CZK and the support of the cultural segment in the amount of 120 million CZK. The proposals will now be discussed by city councilors.

However, according to PricewaterhouseCoopers, the state has to speed up its assistance to Prague entrepreneurs. The Covid I and II programs were unavailable to them, and the city had to offer the Covid Praha program from its own limited resources.

The analysis clearly shows the extent of the problem, at some 600 billion to three-quarters of a trillion CZK only for SMEs. Prague, with an annual budget in the tens of billions of crowns, said in a press release that it is not able to solve this alone. The Covid III program, which the government is preparing, should partially help.

“In terms of the amount of funds released, government support is more focused on large companies, but for Prague, the primary support is for smaller companies that bring innovative know-how to the city,” City Councilor Vít Šimral (Pirates), responsible for entrepreneurship and innovation, said.

“We have sacrificed 600 million CZK of our operational program, which was originally intended to support innovation. I hope that the government will not forget us when planning financial allocations of new European fund programs, and that Prague entrepreneurs will have the same opportunity to reach for this money as entrepreneurs in other regions of the Czech Republic,” Šimral added.

City Assemblyman Zdeněk Zajíček (ODS) said Prague is the economic engine of the whole country. “Entrepreneurs in the rest of the [Czech] Republic are often dependent on Prague entrepreneurs. Therefore, they need special attention and support. We are pleased to have agreed across the political spectrum to work with business representatives, whether or not they are represented by the Chamber of Commerce or other associations,” Zajíček said, adding that the SMEs brought knowledge with them that was essential for support programs to work.

City Assemblyman Radomír Nepil (ANO) pointed out that the Czech government has already announced the launch of the Covid III program, enabling the drawing of state-guaranteed loans from banks in the amount of 500 billion CZK. “But I don’t think we can end there. The aid must be much more massive. Both from the government and from the management of Prague. I also expect the City Council to prepare a clear plan on how to support Prague entrepreneurs, if there is interest, we will be happy to participate in it,” Nepil said.

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