Czech Republic

Capital: Prague

Local time:
It is %T:%M %A in Prague

GDP growth rate: 2.5% in 2013

FDI stock: 129 893 million USD in 2010

Economic trends

The Czech Republic's economy is one of the most developed in Central and Eastern Europe. After experiencing a sharp drop in 2009 (-4.2%) due to the global recession, the country resumed growth in 2010 (2%). However, there was again a slowdown in 2011 (1.7%) and the situation should deteriorate further in 2012 (around 0.2%) due to the difficulties faced by the country's trading partners in the eurozone. The country's economic growth is strongly influenced by the demand of exports and the FDI inflow.

Despite the new worsening of the economic climate, the government intends to continue the austerity measures aimed at fiscal consolidation. New budget cuts were announced in January to bring the budget deficit below 3% of GDP by 2013, with the idea of meeting the Maastricht criteria. A reform of the health system and pensions is also planned. The long-term goal is to make the Czech Republic one of the world's twenty most competitive economies by 2020, developing infrastructure, strengthening institutions and governance, reforming the education sector, increasing labor market flexibility and improving the business climate. Export diversification is also part of the strategy.

The unemployment rate, which has increased under the effect of the global crisis, remains at around 7% of the active population.

Main branches of industry

The agricultural sector went through a serious crisis in the 90s and, even today, it is still heavily subsidized.  It generates approximately 2% of the country’s GNP and employs more than 3% of the active population. The main agricultural products are sugar beets, potatoes, wheat, barley and hops. 

The production sector is mostly private, it accounts for almost 40% of the GNP and employs 40% of the active population. The growth at the level of performance was parallel to the increase in manpower's productivity. One of the main manufacturing sectors is the auto industry, with Skoda (Volkswagen company).  Foreign investors such as Toyota and PSA also started producing cars in the Czech Republic since 2005.  However, this sector has now reached a saturation point. Nearly 10,000 jobs were eliminated in 2009 because of the international crisis. The textile sector is becoming very dynamic. 

Services contribute to 60% of the GDP and employ more than half of the active population.  The tourism sector is booming, thanks to the city of Prague, in particular, which is a very attractive tourist center.

International trade

The Czech Republic's economy is very open to foreign investment. Trade represented more on average over 145% of the GDP in 2008-2010. Its membership to the European Union has allowed the Czech Republic to enter into the common market and to consolidate its position as a low-cost production base. 80% of the country's trade is now conducted with the OECD countries (of which 80% is with EU countries).  A certain number of agreements made it easier to trade with neighboring countries (CEFTA). The country has recorded a structural positive trade balance since it became a member of the European Union, a trend that should continue. The trade balance increased by 20% in 2011, driven by the exports.