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The purpose of this presentation is to bring you economic and legal data related to COVID-19 and to outline the legal possibilities of the solution.


The Czech Republic lacks comprehensive economic analyzes of the impact of COVID-19 (eg decline in GDP, percentage declines in company turnover by industry, etc.), individual institutions and bodies only talk about the economic recession, they provide partial information, which mostly relates only to the volume of financial assistance and fiscal steps of the CNB, while it is now crucial for companies to have their own opinion based on credible analyzes regarding the estimation of further economic development in the Czech Republic and subsequently the possibility to make relevant economic decisions and subsequent legal steps.


The validity and credibility of the economic data presented in this presentation is due to the very fact that their authors are the most important global financial institutions, rating companies and the strongest global banking investment companies. From the data of VARGA Legal, the current economic impact of COVID-19 on the Czech economy and its possible further development can be estimated from these data with a high degree of probability .



I. The COVID-19 pandemic problem


  • Even before March 23, 2020, when the government of the Czech Republic began to argue with the Public Health Protection Act, it must have been clear to reasonable entrepreneurs and managers that resolving damages against the state through the crisis law will be unfeasible in practice. (It was logical from the beginning, which was subsequently stated by the Minister of Finance of the Czech Republic, Mrs. Alena Schillerová, that the state would lose trillions of crowns)


  • The COVID Loan program of the Czech-Moravian Guarantee and Development Bank (ČMZRB) approved by the government on March 9, 2020 stopped the receipt of new applications as of March 20, 2020 at 8:00 AM. It can be expected that the COVIDII program will also be overloaded, it is a question of each specific company whether it will meet the conditions of the program at all.


  • CzechInvest project efficiency & Ministry of Industry and Trade is too early to assess.



II. Economic impacts of COVID-19 - strategic decisions of companies



  1. Economic situation worldwide and in the EU


All globally recognized institutions:


thus, the most important members of the so-called "bulge bracket" group state that we are already in an economic recession worldwide . Almost all of these institutions rate the current recession as deeper and more serious than the Global Financial Crisis 2009 (Lehman Brothers).


The global rating agency Moody's officially states the forecast of gross domestic product for the so-called G20 countries as follows:
















Source: official website of the rating agency Moody`s, available at , update to 25.3.2020



The global rating agency S&P (Standard & Poors) presents their forecasts of the impact of COVID-19 on individual market segments (Unfortunately, S&P does not provide a comprehensive economic analysis, only sub-segments and markets, so the presentation only provides a link to this data), update to 27.3.2020, below:


According to publicly available data, the rating agency Fitch states the rating of the Czech Republic at the AA- level, ie stable. This rating is reported by Fitch on 24.01.2020, ie it is irrelevant for the impact assessment of COVID-19.


Source: Fitch rating agency, update as of 24.01.2020


The most clear data evaluating the impact of COVID 19 from various economic and health aspects according to individual continents, markets and segments is presented by the global investment banking company Goldman Sachs. According to her analysis, the EU is already deeper in the recession than the Global Economic Recession 2009 (the collapse of Lehman Brothers)


Development of the PMI index in the EU


















Explanation: The Purchasing Managers Index (PMI) is closely linked to gross domestic product (GDP).


Source: Goldman Sachs, Consumer and Investment Management Division, Investment Strategy Group: SARS-Coronavirus-2 / COVID-19: An Update on Developments in Europe, up-date 26.3.2020 see /talks-at-gs/03-26-20-update-coronavirus-europe-f/report.pdf


Analysis of Goldman Sachs declines of individual segments of the EU economy - current impact of COVID-19















Source: Investment Strategy Group, Goldman Sachs Global Investment Research, up-date 26.3.2020


In particular, from the last two tables above it is possible to deduce the current state of GDP and individual market segments within the EU countries and thus estimate the current state and forecast of the development of the economic situation of COVID 19 in the Czech Republic. If these data needed to be clarified, the VARGA Legal partner would be happy to do so in a non-binding consultation.



2. Economic situation of the Czech Republic


As mentioned in the presentation above, in the Czech Republic comprehensive economic data of the impact of COVID-19 in the opinion of VARGA Legal is missing (eg decline in GDP, percentage declines in turnover of companies by industry, etc.), individual institutions and bodies only talk about economic recession. information, which mostly relates to the volume of state financial assistance and the CNB's fiscal actions. However, these data cannot help companies estimate the further development of the Czech economy and thus help to take appropriate economic measures and subsequent legal action.

According to data from the International Monetary Fund (IMF), the volume of government support of the Czech Republic - direct and indirect - is in total the third largest in the EU, reaching 18% of GDP of gross domestic product (see chart). Logically, Germany comes first.
















Source: Czech Fund, reference to the IMF, up-date as of March 29, 2020


However, it should be noted that these volumes include measures in the fiscal (budgetary) area, not in the monetary policy area. Also, every sensible manager will realize that these are the reserves of individual states, which are rapidly shrinking as the global economy slows down . Very simply and in layman's terms, this is a short-term financial injection given by the state's reserves. But from the point of view of individual companies, the declining markets and the reflection in GDP (deeper across the Global Financial Crisis 2009 - see Moody's data and Goldman Sachs data) and the fact that economic losses (damages) must be solved by themselves and not rely on state compensation - are decisive - see the issue of the Crisis Act vs. the Public Health Protection Act in the presentation above.


The CNB Board reduced the key interest rate by 0.75 percentage point to 1%. The last time the council cut rates on March 16, 2020, by half a percentage point. The aim is to mitigate the effects of the situation caused by the coronavirus epidemic on Czech companies, entrepreneurs and households. The CNB expects a strong recession.


Source: ČTK, up-date 26.3.2020, available at



III. Legal aid AK VARGA Legal sro - COVID-19


We are happy to communicate the details of economic data to the clients of VARGA Legal sro, both from the point of view of the Czech Republic and from a global point of view, as well as the expected economic development and rational justification on which our predictions are based.


This information is key for the management of companies both in terms of strategic decision-making regarding the structure of the company, employees, portfolio of products and services of the company, as well as in terms of basic strategic issues of each company, ie whether to address COVID-19:


strategy A - by increasing the competitiveness and economic survival of the company


strategy B - attenuation of the company resp. Insolvency.




Increasing the competitiveness and economic survival of the company


  1. Phases - minimization of losses and damages

  • View business relationship supplier - customer (impossibility of performance, substantial change of circumstances, force majeure and application of other institutes)

  • The employer's view (effective termination and changes in employment, the risks it brings from the point of view of labor law)


Phase 2 - adaptation of the portfolio and company structure to the new conditions of COVID-19

  • Understanding market changes from the perspective of the company and its portfolio

  • Strengthening the online environment

  • Emphasis on risk management

  • Legal structural changes of the company


Phase 3 - increasing competitiveness and strengthening the business position

  • Assistance and consultation in strategic decision making

  • Effective setting of contractual relations

  • Distribution of risks




Company attenuation resp. Insolvency


  • Legal aid in matters of insolvency proceedings

  • Among other things, AK VARGA Legal sro constantly monitors changes and planned changes in the area of ​​insolvency law. We expect the Ministry of Justice to complete the implementation of the European Restructuring and Insolvency Directive and a new law on preventive restructuring could be adopted.



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