The Czech economy is export-oriented and is
therefore greatly affected by the cyclical situation in
the world. Both the global financial crisis of 2008 and
the subsequent recession, as well as the problems in the
euro zone, hit hard on the economy. From 2014, growth
reversed again, largely due to export success for the
automotive and electronics industries.
There is also a significant service sector, with
trade, transport, financial services, education and
health care (in recent years, for example, a number of
fertility clinics have been opened), tourism and more.
Agriculture now accounts for only a few percent of gross
domestic product (GDP).
Major imports by Czech Republic, covering a full list of top products imported by the country and trade value for each product category.
There are major regional differences in economic
development. In and around Prague, the economy is strong
as well as close to the German and Austrian borders. At
the same time, the northern parts of the country, where
the coal and steel industry used to dominate, have been
hit hard by closures and unemployment.
Czechoslovakia had been one of the world's most
advanced economies during the interwar period, but was
drawn during the communist years with an oversized and
energy-intensive heavy industry and a disadvantaged
service sector. In the fall of communism in 1989,
however, there was a legacy to build upon and
Czechoslovakia managed the transition from plan to
market economy relatively quickly. The country began
early privatizations, where citizens, on favorable
terms, were offered the opportunity to participate in
state-owned businesses. Foreign investment poured in and
the industry largely succeeded in increasing its
productivity and adapting to the Western European export
Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including EZS which represents the country of Czech Republic.
However, setbacks came along the way. At the end of
the 1990s, falling exports contributed to a currency and
banking crisis. But after a few years of recession, the
economy turned up again. From the EU accession in 2004
to the end of 2008, GDP grew by an average of 6 percent
per year. But the financial crisis caused GDP to fall by
more than 4 percent in 2009. After that, the economy
recovered somewhat, before the figures again came to red
in 2012 and 2013.
The slowdown in the economy contributed to the budget
deficit rising, which pushed the government into cuts,
not least within the social welfare system, and tax
increases. Its objective was to reduce the deficit below
3% of GDP to meet the conditions for joining the euro
zone (see Foreign Policy and Defense). The economy
turned upwards again from 2014 and the following two
years the Czech Republic had a decent growth. New
investments in infrastructure, partly with the help of
EU money, contributed to the upswing, as did increased
domestic consumption, as wages rose after several years
of poor wage growth. Nevertheless, GDP in 2016 was still
lower than in the record years 2004-2006.
In 2016, the government was able to show a surplus in
the state's business, instead of an expected budget
deficit (see also Current policy). This was largely due
to increased tax revenues (among other things, VAT had
been increased in 2013), but also because government
spending was lower than expected. Inflation remained
low, largely due to falling food and energy prices.
When the recession came at the end of 2008,
industrial production fell sharply, not least vehicle
production. Almost all cars were exported to Western
Europe, where new car sales crashed. Car manufacturers
with Volkswagen-owned Škoda in the lead alerted
employees and cut back on production.
But soon the industrial sector began to recover.
After a weak 2012-2013 production rose again. This was
particularly good for the automotive industry, thanks to
continued high demand from Russia, several Asian
countries and, in recent years, but also because of
increased sales in the domestic market. In 2015, 1.3
million cars were manufactured in the Czech Republic.
The electronics industry also performed well. The export
companies received good help from the low exchange rate
for the Czech Koruna (from 2013 the Czech Central Bank
intervened several times to keep the exchange rate down
in order to avoid deflation). However, one inhibiting
factor is the lack of skilled labor.
In 2011, less than a fifth of the economy was
estimated to remain in state ownership. At that time,
the remaining parts of the telecommunications company
Český Telecom and the oil company Unipetrol had been
sold. In 2013, the government also managed to sell
shares in the then loss-making airline Czech Airlines to
a Korean company, Korean Air. However, the state planned
to retain its majority stake in the profitable
electricity company ČEZ and other state companies that
were considered to be strategically important.
Government debt has risen sharply in the 2000s, but
is still low compared to many other EU countries. An
important goal of the bourgeois government's tough
savings policy 2010-2013 was to keep the government debt
The Czech Republic has received much EU support for
building infrastructure such as highways, railways and
water treatment plants. However, the EU has detected
deficiencies in the Czech authorities' control of the
projects and also fraud attempts and several times the
EU has withheld parts of the support pending control
should be tightened. In 2016, the Czech Republic was
ranked 47th out of 176 countries in the Transparency
International Index of World Corruption.
The Czech Republic had long deficits in both trade
and current account balances. In 2004, this was reversed
thanks to increased exports of cars and machinery, and
since then the country has had a positive trade balance.
The current account deficits, which also include trade
in services, were exchanged for a smaller surplus in
2014 and 2015. This is because the outflow that occurs
when foreign industrial companies in the Czech Republic
recover their profits has been offset by an influx of EU
support and new foreign investment..
Germany is the country's main trading partner. Most
of the trade is done with other EU countries, but the
government is also investing in entering new markets,
not least the Chinese.
FACTS - FINANCE
GDP per person
US $ 23,079 (2018)
US $ 245 226 M (2018)
3.0 percent (2018)
Agriculture's share of GDP
2.0 percent (2018)
Manufacturing industry's share of GDP
23.1 percent (2018)
The service sector's share of GDP
55.8 percent (2018)
2.6 percent (2019)
Government debt's share of GDP
32.6 percent (2018)