The Czech government is preparing an amendment to the law that would allow building authorities to revert to systems used prior to the recent digitization of the construction process, which has faced widespread criticism. Vice-chairman of the ODS and Finance Minister Zbyněk Stanjura confirmed that the amendment, which will not be presented as a government proposal for fast approval but as a parliamentary amendment, will be ready by next week.

The digitization of the construction industry, introduced in July, has been marred by operational issues that are causing significant financial strain. Analysts estimate that these complications could lead to losses of up to CZK 15 billion in the second half of this year, with the potential for damage to reach CZK 40 billion in 2024 if not addressed swiftly.

While the amendment will restore the previous systems temporarily, it is unlikely to be a complete return to pre-digitization methods. Stanjura explained that although the old systems would be reinstated for now, a full reversion is not feasible. Transport Minister Martin Kupka has said that by mid-October, the government will propose additional steps, with the eventual goal of having a more functional digitized system in place within 12 to 18 months.

The issue has put additional pressure on the government, especially Prime Minister Petr Fiala, who had previously proposed the dismissal of Deputy Prime Minister for Digitization and Minister for Regional Development Ivan Bartoš due to the problems with the digital system. The opposition, including the ANO party, has been vocal in calling for a return to the original systems, citing inefficiencies and delays caused by the new digitization.

The Czech government introduced the digitalization initiative as a part of efforts to streamline the construction permitting process, but the transition has been less than successful. Building authorities and municipal offices have faced major difficulties adapting to the new systems, and delays in processing building permits have already affected the construction sector.

According to Radim Dohnal, an analyst from Capitalinked, the digitization failures could reduce the number of building permits issued by 5 percent in the second half of 2023 and by as much as 8 percent in 2024. This reduction in construction activity could impact the country’s GDP by CZK 15 billion in the latter half of this year and CZK 40 billion next year.

Economists, including Pavel Sobíšek from UniCredit and Petr Dufek of Creditas Bank, have cautioned that the impact of the digitization failure cannot be fully assessed yet. They argue that the full financial effect may not be clear until the end of the year, as many applications for permits may have been moved up to earlier quarters.

The situation is concerning, as the digitization of the construction process was initially meant to expedite the granting of building permits and enhance efficiency in the sector. However, the poor performance of the system in its current form has led to mounting concerns over its long-term effectiveness.

Štěpán Křeček, an economist and adviser to the Prime Minister, warned that the losses from the failed digitization could continue to grow if the issue is not addressed swiftly. He suggested that the original systems, which are more reliable, should be reinstated until a functional digital solution can be fully implemented. The government’s goal is to have the new digitization system operational within 12 to 18 months, though this timeline extends beyond the next parliamentary election, which is expected in 2025.

In summary, the Czech government faces significant challenges as it tries to address the ongoing issues with construction digitization. While interim solutions are being proposed, the long-term success of the digitization project remains uncertain, and the sector is grappling with mounting losses and delays.

Source: CTK
Photo: Zbyněk Stanjura – Vice-chairman of the ODS and Finance Minister

The German government is preparing to revise its economic outlook for 2024, with expectations of no growth this year, according to a Bloomberg report citing sources familiar with the matter. Germany, the largest economy in Europe, experienced a decline in gross domestic product (GDP) last year, and the revised forecast is set to reflect further economic stagnation.

The updated outlook is scheduled for release next Wednesday. In its previous forecast, issued in April, the government had predicted a modest 0.3 percent GDP growth for 2024. However, sources indicate that the new assessment will likely reflect stagnation at best, and Germany’s leading economic institutes recently predicted a contraction of 0.1 percent in GDP for the year.

As Germany is the Czech Republic’s largest trading partner, the economic slowdown poses a significant concern for Czech companies that rely heavily on the German market.

This downgrading of economic expectations comes as a blow to Chancellor Olaf Scholz and his coalition government, particularly with general elections looming in 2025. Voters have already shown discontent with the current administration, as reflected in the June European Parliament elections and the September regional elections in the eastern German states of Saxony and Thuringia.

Source: CTK