AmCham Vice-President Michal Nebeský of Citi bank focused on the macroeconomics and the issue of inflation. He explained how pressure on input prices during the pandemic makes everything more expensive. There is disruption of supply channels, shortage of products in many industries (e.g computer chips), as well as money which people saved during the pandemic and expectation is high the money will be put into work now. The delayed consumption and investment will resume - and it is already happening, as everybody is ready to go full steam and start spending – which means more pressure on prices. The situation is not rosy. The inflation in the Czech Republic is transitory and can be controlled in the Czech Republic, but it will also be influenced by the external world, EU and the global economy.
Board member Josef Kotrba of Deloitte added that in terms of debt, the Czech Republic is still within in a reasonable band. However, the official prediction of the Czech Ministry of Finance shows the debt has been growing fast. He described the debt situation in Ireland after the crisis in 2009 and how it has improved since. They were very careful about increasing corporate income tax not to undermine their unique position as a corporate host. Should we look for inspiration abroad, it should be Ireland.
Real Estate Council member Blanka Vačkova of JLL explained how high level of housing prices is pushing young families, entry-level workers and public service workers out of Prague. Housing prices are growing faster than wages, and are thus inflating wages. The driving pressures behind dwellings in Prague are – one, there is money in the economy, and two - flat is an investment product. Since 2016, the prices of appartements in Prague have increased by 43%. Other factors related to the price include mortgage rate policy of the Czech National Bank, new Building Law, City initiatives in resi to rent development, Metropolitan Plan, or political debates about taxing 2nd and 3rd flat owned.
Board member Jaroslava Rezlerová of ManpoweGroup pointed to the fact that due to the pandemic people don’t want to change their jobs. She expects a further decrease in unemployment rate in the coming months, which is dangerous, as shortage of workforce will go up. The unavailability of workforce in the Czech Republic is growing and so is demand from employers. Czechia can come to the point that there will be no available workforce and the market will become blocked. When we compare the vacancies and job seekers statistics, the job seekers are not really looking for job. 60% of employers in a recent ManpowerGroup CZ survey said they have had long term difficulty to fill their vacancies due to the talent shortage. Well-structured and well-managed immigration together with other measures related to the structure of the economy could help.
Board Member Michel Perret of Carrier Refrigeration added that there needs to be a sustainable way of keeping borders open (not simply close and reopen, on and off). This includes re-attraction of the immigrated workforce that has left the country. The immigration policy should be on the top of the agenda, together with vocational training allowing young people to connect with companies and the world of work, as well as university technical education which is critical to success for manufacturing companies. Digitization of production is an investment is another area that needs to be considered, and this is an area where the Czech Government can help, together with EU funding. Reducing high payroll taxes is another point. More than 20% of the Czech GDP is created in manufacturing, plus services adjacent to manufacturing activity (again a big portion of GDP).
According to Board member Violeta Luca of Microsoft by 2030, up to 1.1 million jobs in the Czech Republic will be automated. At the moment, there are not enough experts in the Czech population with advanced ICT technologies; especially in the age group 25-54 years, where the difference compared to technological champions is on average up to 46%. Of the total number of workers, ICT professionals in the Czech Republic make up 5.6% in the youngest age group (even more than in developed countries), in the age group 30+ it is "only" 3.5% and in the generation older than 45 only 2.7%, which represents a certain challenge for the Czech Republic. There is a space re-skilling and upskilling. The average "lifespan" of skills is less than five years.
Board member Oliver Stucky of Honeywell said that the Czech Republic has the potential thanks to system engineering & embedded system legacy not only to serve as a hub for those warehouses, but, especially in Brno, to serve as major developer and exporter of digital warehouse technologies. Honeywell has been involved in this major trend, building continuously their capacities and team in Brno.
AmCham President Michal Chour of Alcron Hotel Prague talked about the bleak situation of the Prague hospitality sector. The position of Prague has deteriorated faster compared with the neighbouring capitals, such as Bratislava, Budapest, Warsaw or Vienna. There is still about 20% of capacity not been put back on the market, the question is if it will happen, because the sector is facing labor shortage. He recommended following the example of Budapest deploying professional big scale digital marketing campaign targeting the type of customers hotels would like to see in Prague in the future. The City should also regulate short term accommodation. Increased room rax would allow to finance promotions and/or infrastructural projects which would increase visibility of the destination, expansion of congress centers etc.
AmCham Vice-President Sanjiv Suri of Zátiší Group added information on how a substantially lower number of commuters means less retail shopping and less hospitality activity on a daily basis. The hybrid model will continue, obviously more for the highly paid IT, management finance etc. The best scenario would be a day or a day and a half at home office, but even that means a 20-25% drop in the people who would be on average in the office every day compared to 2019. Three days at home would mean a 60% drop (the level we are observing now}.
AmCham Vice-President Milan Šlapák of GE Aviation pointed to the fact that the Covid crisis highlighted the importance of own R&D, because businesses with their own R&D, generating intellectual property are a relevant part of their supply chains and their business families. Three countries in the EU – Germany 34%, France 17%, Italy 9%, account for 60% of the overall spending on R&D in the EU. That is our competition, these three are considered leaders in the aviation, aerospace, automotive, where the expertise, intellectual property is involved. Total Czech expenditures on R&D reach below 2% of GDP, driven mostly by businesses. Additional progress in building the three pillars of innovation - ecosystem, infrastructure/experts and funding - is needed. It is also businesses’ role to work with stakeholders to improve the situation.
More details, including a video, are available to AmCham members.
8th June 2022
31st March 2022
22nd June 2022