Amidst an alarming economic landscape, the financial well-being of Czech citizens is deteriorating, leaving a quarter of the population facing dire economic challenges that are impeding their ability to provide for their households. Paradoxically, despite these growing concerns, Czechs maintain a steadfast confidence in their financial knowledge and decision-making abilities.

The latest data from an international survey conducted by Kantar on behalf of the International Personal Finance group highlights a concerning trend. The proportion of Czech individuals grappling with financial distress has surged by over six percentage points year-over-year. In a stark contrast to the previous year, where 54 percent of individuals reported experiencing financial discomfort, this figure has now escalated to nearly 60 percent.

The most prominent manifestations of this economic strain are seen in scenarios characterized by inadequate funds to meet household expenses, income shortfalls, and denied loan applications. A striking quarter of Czechs have encountered the hurdle of insufficient funds to maintain their households, marking a substantial increase from the prior year’s one-fifth figure. Among age groups, individuals aged 35 to 44 have been the hardest hit, with the proportion facing this challenge skyrocketing from 20 percent to 34 percent within a mere year.

The survey also reveals concerning trends in loan application rejections. Reports of being turned down for loans by banks have surged by 30 percent, while rejections by other lenders have spiked by an alarming 85 percent compared to the previous year. Additionally, the survey uncovers that instances of long-term unemployment, lasting over a year, have increased by nearly a quarter from the previous year, affecting 16 percent of respondents.

Lubomír Brůha, Provident’s Director of Credit Risk, notes the rising trend in loan applications. However, he underscores the potential risks posed by the repayment of multiple obligations, especially during trying times, emphasizing the importance of meticulous assessment of applicants’ repayment capacities to mitigate financial risk.

Jiří Hluchý, founder of fintech company Frenkee, echoes these concerns, shedding light on the surging consolidation applications, often stemming from accumulating excessive debts for non-essential expenditures such as luxury vacations or discretionary consumer goods.

As financial challenges mount, Czechs are increasingly turning to their families, and to a lesser extent, friends and more distant relatives, for financial aid. Notably, fewer individuals are seeking assistance from the state, indicating a reliance on personal networks.

Intriguingly, despite the growing financial hardships, Czech citizens continue to express confidence in their financial literacy and decision-making capabilities. Over the past three years, this confidence has surged, with nearly 62 percent of respondents feeling assured in their financial acumen. However, the survey underscores that a significant disconnect may exist between self-confidence and actual financial knowledge.

This prevailing scenario underscores an urgent need for enhanced financial literacy education in the Czech Republic. Such efforts are crucial to mitigate the prevalence of unnecessary borrowing, high-interest financial pitfalls, and to equip individuals with the skills needed to navigate complex economic landscapes effectively. Without concerted action, the widening gap between perceived financial confidence and practical knowledge could exacerbate the challenges faced by Czech citizens in these financially tumultuous times.

Article by Prague Forum