| Date - Field | Czech Republic - Economy - overview |
2012 January
Economy - overview | The Czech Republic is a stable and prosperous market economy, which harmonized its laws and regulations with those of the EU prior to its EU accession in 2004. While the conservative, inward looking Czech financial system has remained relative healthy, the small, open, export-driven Czech economy remains very sensitive to changes in the economic performance of its main export markets, especially Germany. When Western Europe and Germany fell into recession in late 2008, demand for Czech goods plunged, leading to double digit drops in industrial production and exports. As a result, real GDP fell 4.1% in 2009, with most of the decline occurring during the first quarter. Real GDP, however, has slowly recovered with positive quarter-on-quarter growth starting in the second half of 2009 and continuing throughout 2010. The auto industry remains the largest single industry and, together with its suppliers, accounts for as much as 20% of Czech manufacturing. The Czech Republic produced more than a million cars for the first time in 2010, over 80% of which were exported. Foreign and domestic businesses alike voice concerns about corruption, especially in public procurement. Other long term challenges include dealing with a rapidly aging population, funding an unsustainable pension and health care system, and diversifying away from manufacturing and toward a more high-tech, services-based, knowledge economy. |
2011 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Maintaining an open investment climate has been a key element of the Czech Republic's transition from a communist, centrally planned economy to a functioning market economy. As a member of the European Union, with an advantageous location in the center of Europe, a relatively low cost structure, and a well-qualified labor force, the Czech Republic is an attractive destination for foreign investment. Prior to its EU accession in 2004, the Czech government harmonized its laws and regulations with those of the European Union. The small, open, export-driven Czech economy grew by over 6% annually from 2005-2007 and by 2.5% in 2008. The conservative Czech financial system has remained relatively healthy throughout 2009. Nevertheless, the real economy contracted by 4.1% in 2009, mainly due to a significant drop in external demand as the Czech Republic's main export markets fell into recession. GDP is expected to grow by 2.4% in 2010, driven largely by a rebound in external demand, particularly from Gremany. |
2010 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Maintaining an open investment climate has been a key element of the Czech Republic's transition from a communist, centrally planned economy to a functioning market economy. As a member of the European Union, with an advantageous location in the center of Europe, a relatively low cost structure, and a well-qualified labor force, the Czech Republic is an attractive destination for foreign investment. Prior to its EU accession in 2004, the Czech government harmonized its laws and regulations with those of the European Union. The government plans to meet the criteria for joining the euro area around 2012. The small, open, export-driven Czech economy grew by over 6% annually from 2005-2007 and strong growth continued throughout the first three quarters of 2008. Despite the global financial crisis, the conservative Czech financial system has remained relatively healthy. The rate of Czech economic growth, however, fell in the fourth quarter of 2008, mainly due to a significant drop in demand for Czech exports in Western Europe. This trend is expected to continue, with many analysts predicting the Czech economy to contract slightly in 2009. |
2009 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Growth in 2000-08 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as the availability of credit cards and mortgages increases. The current account deficit has declined to around 3% of GDP as demand for automotive and other products from the Czech Republic remains strong in the European Union. Rising inflation from higher food and energy prices are a risk to balanced economic growth. Significant increases in social spending in the run-up to June 2006 elections prevented the government from meeting its goal of reducing its budget deficit to 3% of GDP in 2007 and 2008. Negotiations on pension and additional healthcare reforms are continuing without clear prospects for agreement and implementation. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth. The pro-business Civic Democratic Party-led government approved reforms in 2007 designed to cut spending on some social welfare benefits and reform the tax system with the aim of eventually reducing the budget deficit to 2.3% of GDP by 2010. Parliamentary approval for any additional reforms could prove difficult, however, because of the parliament's even split. The government withdrew a 2010 target date for euro adoption and instead aims to meet the eurozone criteria around 2012. |
2008 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Growth in 2000-07 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as the availability of credit cards and mortgages increases. The current account deficit has declined to around 3.3% of GDP as demand for automotive and other products from the Czech Republic remains strong in the European Union. Rising inflation from higher food and energy prices are a risk to balanced economic growth. Significant increases in social spending in the run-up to June 2006 elections prevented, the government from meeting its goal of reducing its budget deficit to 3% of GDP in 2007. Negotiations on pension and additional healthcare reforms are continuing without clear prospects for agreement and implementation. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth. The pro-business Civic Democratic Party-led government approved reforms in 2007 designed to cut spending on some social welfare benefits and reform the tax system with the aim of eventually reducing the budget deficit to 2.3% of GDP by 2010. Parliamentary approval for any additional reforms could prove difficult, however, because of the parliament's even split. The government withdrew a 2010 target date for euro adoption and instead aims to meet the eurozone criteria around 2012. |
2007 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Growth in 2000-05 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. The current account deficit has declined to around 3% of GDP as demand for Czech products in the European Union has increased. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned telecommunications firm Cesky Telecom took place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth. |
2006 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Growth in 2000-04 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. Current account deficits of around 5% of GDP are beginning to decline as demand for Czech products in the European Union increases. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned telecommunications firm Cesky Telecom is scheduled to take place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth. |
2005 January
Economy - overview | The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Growth in 2000-04 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. Current account deficits of around 5% of GDP are beginning to decline as demand for Czech products in the European Union increases. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned telecommunications firm Cesky Telecom is scheduled to take place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth. |
2004 January
Economy - overview | One of the most stable and prosperous of the post-Communist states, the Czech Republic has been recovering from recession since mid-1999. Growth in 2000-03 was supported by exports to the EU, primarily to Germany, and a near doubling of foreign direct investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. High current account deficits - averaging around 5% of GDP in the last several years - could be a persistent problem. Inflation is under control. The EU put the Czech Republic just behind Poland and Hungary in preparations for accession, which will give further impetus and direction to structural reform. Moves to complete banking, telecommunications, and energy privatization will encourage additional foreign investment, while intensified restructuring among large enterprises and banks, and improvements in the financial sector, should strengthen output growth. Nonetheless, revival in the European economies remains essential to stepped-up growth. |
2003 January
Economy - overview | One of the most stable and prosperous of the post-Communist states, the Czech Republic has been recovering from recession since mid-1999. Growth in 2000-02 was supported by exports to the EU, primarily to Germany, and a near doubling of foreign direct investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. High current account deficits - averaging around 5% of GDP in the last several years - could be a persistent problem. Inflation is under control. The EU put the Czech Republic just behind Poland and Hungary in preparations for accession, which will give further impetus and direction to structural reform. Moves to complete banking, telecommunications, and energy privatization will encourage additional foreign investment, while intensified restructuring among large enterprises and banks and improvements in the financial sector should strengthen output growth. |
2002 January
Economy - overview | Basically one of the most stable and prosperous of the post-Communist states, the Czech Republic has been recovering from recession since mid-1999. Growth in 2000-01 was led by exports to the EU, especially Germany, and foreign investment, while domestic demand is reviving. Uncomfortably high fiscal and current account deficits could be future problems. Unemployment is gradually declining as job creation continues in the rebounding economy; inflation is up to 4.7% but still moderate. The EU put the Czech Republic just behind Poland and Hungary in preparations for accession, which will give further impetus and direction to structural reform. Moves to complete banking, telecommunications, and energy privatization will add to foreign investment, while intensified restructuring among large enterprises and banks and improvements in the financial sector should strengthen output growth. |
2001 January
Economy - overview | Basically one of the most stable and prosperous of the post-Communist states, the Czech Republic has been recovering from recession since mid-1999. The economy grew about 2.5% in 2000 and should achieve somewhat higher growth in 2001. Growth is led by exports to the EU, especially Germany, and foreign investment, while domestic demand is reviving. Uncomfortably high fiscal and current account deficits could be future problems. Unemployment is down to 8.7% as job creation continues in the rebounding economy; inflation is up to 3.8% but still moderate. The EU put the Czech Republic just behind Poland and Hungary in preparations for accession, which will give further impetus and direction to structural reform. Moves to complete banking, telecommunications and energy privatization will add to foreign investment, while intensified restructuring among large enterprises and banks and improvements in the financial sector should strengthen output growth. |
2000 January
Economy - overview | Political and financial crises in 1997 shattered the Czech Republic's image as one of the most stable and prosperous of post-Communist states. Delays in enterprise restructuring and failure to develop a well-functioning capital market played major roles in Czech economic troubles, which culminated in a currency crisis in May. The currency was forced out of its fluctuation band as investors worried that the current account deficit, which reached nearly 8% of GDP in 1996, would become unsustainable. After expending $3 billion in vain to support the currency, the central bank let it float. The growing current account imbalance reflected a surge in domestic demand and poor export performance, as wage increases outpaced productivity. The government was forced to introduce two austerity packages later in the spring which cut government spending by 2.5% of GDP. Growth dropped to 0.3% in 1997, -2.3% in 1998, and -0.5% in 1999. The basic transition problem continues to be too much direct and indirect government influence on the privatized economy. The government established a restructuring agency in 1999 and launched a revitalization program - to spur the sale of firms to foreign companies. Key priorities include accelerating legislative convergence with EU norms, restructuring enterprises, and privatizing banks and utilities. The economy, fueled by increased export growth and investment, is expected to recover in 2000. |
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This page was last updated on 5 February, 2012 |
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