40 percent of households lost part of their income. However, the real effects of the virus will not be seen until autumn

“Thanks to state support, for example in the form of exchange rates, companies have maintained employment. People also have a share in this, because they created reserves and did not make hasty decisions that could make their situation more difficult,” said Helena Brychová, advisor to the Czech Banking Association (CBA). why the effects of coronavirus are not so strong yet.

According to her, it was also important that the Czechs reduced their consumption and thus kept their savings. Of the 40 percent of households with a loss of income, 4 percent lost their jobs or other means of supplying money altogether. According to Brychová, the development will be decided mainly by autumn events.

“The question is what will the end of state subsidies do with unemployment,” Brychová described, adding that for this reason too, the possible effects of coronavirus need to be shown now. In addition, in the autumn, the Czechs will start repaying the delayed loans.

Due to the changed repayment conditions, the Czechs did not have to pay around 15 billion crowns since the beginning of the pandemic, according to estimates by the banking association. “However, only a minimum of loans will become risky in the autumn,” assured Vladimír Staňura, CBA’s chief adviser. At the end of July, according to the association, banks received almost 400,000 requests for deferral of payments.

According to Staňura, however, the growth of new applications is currently slowing down. “It can be expected that their supply will stop completely in August. In November, all those who received the postponement must start paying again. It will be shown to what extent the postponement was effective,” he said.

Two-thirds of the people had reserves

In addition to keeping people cool, the money saved also helped them. According to a spring survey by the CBA, over two thirds of Czechs have created a reserve. Subsequently, a pandemic was enough for three quarters for an uncertain period.

“If you have the money to cover household expenses for six months, your reserve is sufficient,” Brychová said of the results of the survey. To make sure they have such supplies, households should say before they set out to “spin the wheels of the economy.” However, according to the survey, most of them are doing well, as the Financial Literacy Index has reached its maximum in a few years this year, namely 61 percent.

However, more than a third of the households surveyed did not change their financial habits and did not take any steps to ensure their situation during the coronavirus period. However, such behavior could also have occurred because their financial situation was not affected by the pandemic.

On the contrary, the same number of households reduced their current expenditures and less than a third also forgave larger purchases in the form of televisions, cars or refrigerators. David Šmejkal, director of the Financial Distress Counseling Center, also warns that people will not get too carried away in the summer and forget their responsibilities with banks.

“It would be a mistake to devote free funds to summer fun and not be aware of the risk of legal and enforcement enforcement. Debtors who can repay despite the permitted deferral should do so,” he advises.

The Czechs have been silent about their indebtedness for four years

Czechs applied for loans less at the beginning of the pandemic, but since April, on the contrary, loan applications have risen dramatically. “June was the strongest, which became a record month in recent years,” said Vladimír Staňura. He explains this by the fall in interest rates and the negotiations on the abolition of real estate tax. “It also turns out that a lot of real estate came to market in the summer months,” he added.

CBA’s advisor for financial education, Helena Brychová, also explains the increased interest in loans by saying that people have been preparing for a mortgage loan for a year, and the pandemic has therefore not changed their decision. “The possible abolition of the real estate tax also pushed him more,” she added.

Since the beginning of the state of emergency, banks have also allowed their clients to defer payments. Seven percent of households used such opportunities, and the same number applied for government contributions for the self-employed. Four percent more people also withdrew cash from investment or savings accounts.

At the beginning of the pandemic, on the other hand, the trend was different. In April, banks recorded an increase in deposits of 56 billion crowns. “Households created reserves for possible worse times. However, the question remains whether such savings are good for the economy, because people did not spend so much,” said Staňura.

Also due to possible measures that most households had to take, two thirds of Czechs decided to think more about their finances in the future. For example, 13 percent of them plan to save regularly and twice as much will plan their expenses.

“As in other areas of life, it is essential to be able to look at your situation with foresight and determine your priorities when dealing with money. If we still get into trouble, we need to start solving it as soon as possible, preferably with experts,” Brychová urges.

However, most Czechs do not have such a reaction in case of debt problems. “Everyone is used to the fact that having a loan is a common thing, some of them have even more. But it is very difficult when people do not manage it,” she said. Less than two thirds of people hide their problems for four to more years.

Even if they know about their problems, they do not ask for help. “Subsequently, however, interest rates, sanctions, penalties and the client’s psychological pressure and stress increase. The risk of bad decisions also increases,” said David Šmejkal, director of the Financial Distress Counseling Center.

The Labor Office was replaced by non-profit organizations and financial counseling centers

Even due to greater financial difficulties, more people did not turn to the Green Line at the time of coronavirus. According to the director of the Financial Distress Advice Center, those interested still call the same, except in April and May. At that time, the line recorded several phone calls due to inquiries about nursing homes and the possibility of registering as unemployed.

“We have replaced the functions of state bodies, such as the employment office. However, the number of clients who want to solve installments has been growing since about May. Both those who want to postpone them and those who have difficulty fulfilling them,” added Šmejkal.

According to Lukáš Průcha from People in Need, the Labor Office is not able to react sufficiently either. According to him, he lacks qualified workers who have replaced those field workers from non-profit organizations. “They were approached by people who would not have contacted them in January or February. They were never applicants for support, so they suddenly did not know what to do,” Průcha described at the end of June at a seminar of the Senate Social Welfare Committee.

People aged 30 to 50 call the Counseling Center for Financial Distress most often, the amount of their debt usually reaches around 450 thousand crowns. “We are mainly visited by those who are poorly informed about how to solve their situation. The client’s ability to work critically with the dangers and risks of the financial market is lacking,” said Šmejkal. According to more than three quarters of Czechs, the main reason for their insolvency is naivety.

According to the Labor Office, unemployment has jumped from 3.1 percent to 3.8 since January. In addition to the spread of coronavirus, however, the summer decline in employment in education or reduced activity of companies is also traditionally to blame.

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