Czech Republic Economy Facts
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).
- Countryaah.com: 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 market.
- 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. Check findjobdescriptions to learn more about 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 down.
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)