9
CEC REGIONAL UPDATE Pandemic Overview 3 APRIL 2020
CEC REGIONAL UPDATE
Pandemic Overview
3 APRIL 2020
Table of Contents
BULGARIA ........................................................................................................................... 3 CROATIA ............................................................................................................................. 4 CZECHIA ............................................................................................................................. 5 HUNGARY ........................................................................................................................... 6 POLAND .............................................................................................................................. 7 ROMANIA ............................................................................................................................ 8 SLOVAKIA ............................................................................................................................ 9
Message from the Chairman As corporates continue to face the challenges of the impact of COVID-19 on their businesses, supply chains and logistics, keeping up to date with the latest developments in key markets is crucial. CEC is leveraging its regional Central European coverage to start bringing you a weekly update across the region – high level bullets to give you an at-a-glance picture of the COVID-19 situation and the responses of governments to this dramatic challenge. We will be updating on a weekly basis – more frequently if necessary – and our teams in the local capitals are standing by to provide you with deeper analysis and intelligence if you require it. CEC is here to support your business as always – but also, please stay healthy above all! Marek Matraszek Chairman, CEC Government Relations
BULGARIA (prepared by the CEC Government Relations office in Sofia)
Status of epidemic:
• 457 confirmed cases, 10 deceased (as of 2 April)
Key economic indicators:
• 10,000 people are registered as unemployed in Bulgaria since the beginning of the COVID-9 crisis.
• On April 1, Euler Hermes affirmed Bulgaria's credit rating at 'B2'.
Key issues:
• The Bulgarian cabinet increased the allowable 2020 budget deficit to 2.9% GDP. Shifting from the initially planned balanced budget to budget deficit aims to finance the extraordinary measures taken to deal with the COVID-19 epidemic.
• The Bulgarian parliament adopted a Law on measures and actions during a state of emergency on March 20, intending to limit the spread and overcome the consequences of the COVID-19 epidemic. The law assumes measures on employment and leave; the Unemployment Fund; debt relief; extended tax and procedural deadlines; the use of EU development funds; medical and medicinal supplies; and location data.
• Starting March 31, employers can apply for state compensation to be used for retaining staff. Under the so-called 60-40 mechanism, the state will cover 60% of the salary of employees, while companies will be responsible for the remaining 40%. 213,700 people are registered as unemployed in Bulgaria, and since the beginning of the crisis, 10,000 more have been registered with the labour offices.
• The Bulgarian National Bank (BNB) has announced a package of more than 4.6 billion euros that will be earmarked for measures to tackle the effects of the COVID-19 crisis. The aim is to preserve the resilience of the banking system and reduce the negative effects of the restrictions on citizens and businesses.
CROATIA (prepared by CEC's Croatian partner - Vlahovic Group)
Status of epidemic:
• 1011 confirmed cases, 7 deceased (as of 2 April)
Key economic indicators:
• Credit rating agency Fitch downgraded Croatia's outlook from positive to stable on 1 April, while maintaining its credit rating at BBB-.
• On April 2, more than 144,000 persons were registered as unemployed at the Croatian Employment Service, and in the last 15 days 13,264 unemployed persons were registered
Key issues:
• From the beginning of the COVID-19 crisis, the Croatian National Bank intervened five times in order to keep the stability of the HRK exchange rate to EUR, selling a total of almost € 2.25 billion to banks.
• From 23 March a lockdown (on leaving the place of residence) is in force (with certain exemptions, i.e. commuting), public and interurban traffic is suspended as well as all social and public gatherings
• 250 Croatian companies answered to the appeal of the Economy Minister to domestic manufacturers and suppliers of protective equipment needed during the COVID-19 epidemic. Some companies reopened their ethanol production facilities, while a large number of small producers of spirits, wine and beer also joined this initiative in order to redistill their products into medical alcohol. Domestic clothing companies and others such as entrepreneurs’ incubators or schools will focus on the production of high-tech protection medical face masks.
• On 1 April, the government answered criticisms of the private sector and presented the second set of measures tailored for entrepreneurs – the first set of measures apply from 17 March. The latest set is worth EUR 4 billion, matching the previous one. The measures include a temporary net minimum wage increase from HRK 3,250 to 4,000 for certain companies. Furthermore, companies will be either exempted or entitled to a deferral of tax liabilities depending on their size and situation.
• Latest polls conducted during the ongoing pandemic shows ruling conservative party HDZ and Prime Minister Plenkovic personally have regained the lead. The government has unprecedented support of 94% in the fight against the coronavirus and 65% Croats believe that their country is coping with the pandemic better than other European countries.
CZECHIA (prepared by the CEC Government Relations office in Prague)
Status of epidemic:
• 3604 confirmed cases, 40 deceased (as of 2 April)
Key economic indicators:
• The economic prognosis from -5% to -10% of GDP in 2020 (Deloitte), a rise of unemployment expected to 5.6% in Q4;
• Czechia still keeps unchanged Fitch rating at AA-.
Key issues:
• The Government of Andrej Babis extended the State of Emergency until April 11 – likely will be extended until May 11. Restrictions regarding the free-movement, travel, the requirement to wear a face mask are already in place following, Government’s Orders (Crisis Act). PM Babis proclaimed that several restrictions may be lifted in April.
• Minister of the Interior Jan Hamacek (CSSD) became the head of the Special Emergency Unit. Vice-PM Hamacek replaced Deputy Minister of Health Roman Prymula who will be now concentrating on the launch of Smart Quarantine, a mapping system of the infected via their location and payment records. The Unit also established an economic advisory body, comprised of several chief Czech economists.
• On April 7, the Chamber of Deputies will debate on laws aimed at providing support during the coronavirus epidemic. These include provisions regarding:
o Deferral for payments of mortgages, consumer and business loans for 3 or 6 months; o Loans: Cap on interest rates at 9% rate (repo rate + 8%pp), credit cards exempted; o Business loans and unsuccessful execution proceedings will be terminated; o Financial assistance for self-employed amounting toCZK 25 000 (EUR 1 000); o loan guarantees by the state-owned Export Guarantee and Insurance Corporation
(EGAP); o a wage compensation program Antivirus (Kurzarbeit).
• The Czech National Bank (CNB) released limits when applying for a mortgage (LTV 90%, DSTI 50%, DTI abandoned). On March 26, Bank Board of CNB again lowered the interest rates setting repo rate at 1.00%, Lombard rate to 2.00% and the discount rate to 0.05%. Lastly, CNB also recommended banks and insurance companies to halt dividend payments for the next months.
HUNGARY (prepared by the CEC Government Relations office in Budapest)
Status of epidemic:
• 585 confirmed cases, 21 deceased (as of 2 April)
Key economic indicators:
• Forecasted short term rise of unemployment by 100-200 thousand persons.
Key issues:
• In light of the coronavirus epidemic, the Hungarian government passed new legislation, which is supposed to guarantee the personal, property and legal security of citizens and the stability of the national economy throughout the duration of the crisis:
o XII of 2020 law on the protection against the coronavirus: amongst others, the law provides the government with additional competences in regard to its decrees, allows for certain laws to be suspended for the duration of the epidemic. Elections during the epidemic will not take place. The Government may exercise these prerogatives, only to the extent necessary to prevent, treat, and eradicate the coronavirus disease. The government is obliged to inform the parliament of all undertaken measures.
o New Penal Cases are added to Act C of 2012 on the Criminal Code: new penal cases provide severe sanctions for breaking or obstructing sanitary regimes (e.g. quarantine). Additionally, the new provisions will allow for the legal punishment of fake news regarding the epidemic. Sanctions include imprisonment up to 8 years.
• Government Decree 74/2020. (III. 31.) on certain procedural measures in force during an emergency: the law regulates administrative procedures during the state of epidemic. Furthermore, it defines the mode of operation of administrative bodies and the functioning of public services (e.g. courts).
• The European Commissioner for Justice Didier Reynders announced that rule of law investigations will be carried out in regard coronavirus measures introduced by EU member states. Hungary was named explicitly as one of the countries under the European Commission’s radar.
POLAND (prepared by the CEC Government Relations office in Warsaw)
Status of epidemic:
• 3149 confirmed cases now, 59 deceased
Key economic indicators:
• Fitch maintains Poland's A- and stable outlook for Poland citing "resilience to shock"; • Exchange rate EUR 1: PLN 4.58; • Initial Government forecast predict unemployment growth from current 920 thousand to 1.4
million unemployed.
Key issues:
• On 31.03 the government introduced a further tightening to restrictions on citizen movement as part of the State of Epidemiological Emergency: mandatory 2m of social distancing, further closings of non-essential consumer services, further safety measures in shops which remain open, citizens are to remain home apart for critical purposes, work places are meant to provide gloves, disinfectant and establish minimum 1.5 m distance between workers if possible.
• The government adopted the so-called Anti-Crisis Shield on 31.03. The support package for employers and employees came into life on 01.04. The PLN 212 billion package provides a safety net for the financial sector but also basic aid for businesses. Employers' associations have criticized the measures as lacking - government will soon introduce another package of amendments to reinforce support system.
• The Presidential Election planned for 10 May is still the main political topic. The ruling camp submitted two sets of proposals, including postal voting for all voters or the extension of President Andrzej Duda's term for an additional two years. The opposition criticizes the ruling party and advocates for a State of Emergency to postpone the election.
ROMANIA (prepared by CEC's Romanian partner - Serban & Musneci Associates)
Status of epidemic:
• 2738 confirmed cases, 94 deceased (as of 2 April)
Key economic indicators:
• Exchange rate: EUR 1: RON 4.8288 • Official unemployment rate: 3.9%. On April 2: 800,000 suspended contracts (employees in
technical unemployment, Gov’t pays 75% of their wages),155,675 jobs terminated.
Key issues:
• As of March 16, for 30 days (can be extended), Romania is in a State of Emergency. Measures covered by the State of Emergency include capping prices for drugs, food and public utilities, as well as travel and transport bans. The Government through the Ministry of Interior is given additional powers in order to limit the spread and impact of the coronavirus outbreak (i.e the Minister of Interior can pass Military Ordinances, effective immediate and mandatory). If necessary, measures imposed by Presidential Decree can limit fundamental rights and liberties.
o Emergency Ordinance 29/2020 (March 23) – offers fiscal incentives to companies (postponing taxes), state-guaranteed loans for SMEs.
o Emergency Ordinance 30/2020 (March 21) – state budget covers 75% of the wages of employees which had to be sent in technical unemployment (suspended contracts).
o Emergency Ordinance 37/2020 (March 30) – a moratorium on interest rates (those who no longer afford to pay their loans can opt for postponing them for up to nine months, no additional costs.
o Emergency Ordinance 28/2020 (March 20) – amended the Criminal Code and increased sentences for individuals who are endangering others lives by violating quarantine, or rules dictated by the Ministry of Interior. If said individuals’ actions lead to deaths, the maximum sentence is 15 years behind bars.
o Military Ordinances passed by the Ministry of Interior enforced social distancing (those over 65 are allowed to go outside for a limited time – 11 am to 1 pm); closed down air traffic with Italy and Spain; put a county under total lockdown.
• Military Ordinances are valid only during the State of Emergency. Emergency Ordinances’ enforcement is not limited to a period of time. In parallel with the Gov’t, the Parliament is working towards adopting a different legislative pack which includes: capping essential drug and foodstuff prices; suspending rents and public utilities.
SLOVAKIA (prepared by the CEC Government Relations office in Bratislava)
Status of epidemic:
• 400 confirmed cases, 1 deceased (as of 2 April)
Key economic indicators:
• The Slovak economy can drop by 4.5% to 10% in a worst-case scenario, according to the National Bank of Slovakia
• 75,000-130,000 people could become unemployed
Key issues:
• On 31 March, the Slovak Government passed the first package of anti-crisis measures to help businesses. The packages focus on SMEs and self-employed persons. Employer associations claim these measures are not suitable for large employers. The government is open for discussion on amendments catering to large businesses. Current measures include:
o State will compensate 80% of the employees’ salaries companies which were closed by government;
o Monthly state contribution to self-employed and employees who saw a y-o-y decline in revenues;
o 2019 income tax declaration can be filed and paid one month after the Government declares an end of the crisis.
• The retail sector in Slovakia is severely restricted. Non-essential retail shops remain closed with the exception of grocery shops, drug stores or pharmacies. All these must adhere to strict hygiene rules. Shops must provide hand disinfectants or disposable gloves, ensure customers adhere to the 2m distance rule between each other and restrict number of persons in the shop to a ratio of 1 customer per 25m2 of sale area. On Sundays, shops must close for obligatory disinfection. Special operating hours for senior citizens have been introduced.
• The government and the banking sector are discussing the payment postponement of instalments and interests for mortgages, consumer loans and leasing by 6 to 9 months as of 15 April. Some banks are considering cancelling certain fees for seniors above 65 years of age – this may become mandatory. Draft legislation has not been published. The government may need back out of the recently increased bank levy to win the support of the sector.
• The Slovak PM Igor Matovic is considering a temporary total blackout of the economy to further limit mobility in the country. This would mean shutting down all infrastructure that is not essential. This idea is strongly opposed by Minister of Economy Richard Sulik. Slovakia is already now losing €70 million daily due to COVID virus. The PM requested the Institute for Health Policy for an impact analysis.
