The Russian aggression in Ukraine, raging for more than two months now, has affected the Czech Republic to a significant extent, impacting the prices of energy across all sectors. Coupled with the rising levels of inflation, the country finds itself out of balance, according to Rowan Legal Partner Jan Frey, who says it is quite hard to predict what the rest of the year will bring.
“The political situation in the Czech Republic is quite difficult due to the Russian aggression in Ukraine,” Frey begins. Following two very tough COVID-19-ridden years, Frey reports that the markets and the economy are once again being tested.
“We’re experiencing high inflation as a consequence of the anti-COVID-19 steps adopted by the former government and the energy crisis the country found itself in at the end of 2021,” Frey continues. The energy situation is by no means easier now, following the start of the war in Ukraine, with “energy prices soaring as a consequence." Another consequence of the war, he points out, is that the country is currently facing "an onslaught of Russian nationals attempting to divest their assets away from the Czech Republic.”
Compounding the problem, Frey reports that “new legislation entered into force, concerning FDI, which posted more barriers with respect to investments and acquisitions of strategic assets in key sectors of the economy.” He notes that foreign investments are more strictly monitored. “Also, with the rising inflation, we can expect to see more government measures aimed at stifling its negative effects. The situation is changing quite rapidly, however, so it’s difficult to make an accurate prediction.”
Finally, speaking of particular business sectors, Frey reports that IT, telecommunications, and e-commerce have been “less affected by the energy crisis and rising inflation, on the one hand. On the other hand, the lack of stable energy sources and the surging oil and gas prices are impacting the food industry and the agricultural sector,” he says. “The prices of consumer goods are increasing, and this might be something that will mark the whole year,” Frey concludes.