CZECH REPUBLIC


A proud nation with a good sense of humour, highly educated labour force, and track record of invention (from propeller to contact lenses) and high quality products (cars, beer, glass)

Total area: 78,864 sq km (comparable to Rep. of Ireland)
Population: 10.6 million
Government type: Parliamentary democracy
Administrative division: 14 administrative regions
Capital + other major cities: Prague (1.3 million) + Brno (380,000), Ostrava (300,000)
Currency: Czech Crown (koruna, CZK)
Languages: Czech (official)
Ethnicity: Czech (90.4%), Moravian (3.7%), Slovak (1.9%), other (4%)
Religion: Rom. Catholic 10.4%, Protestant 1.1%, other 3.3%, unspecified and unspecified 34.5%, none 34.5%
President: (Mr.) Miloš ZEMAN (since 8 March 2013)
Prime Minister: (Mr.) Bohuslav SOBOTKA (since 17 January 2014)
Date of EU accession: 1 May 2004
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KEY FEATURES

  • Leader in CEE region by a combination of prosperity, stability, market size, buying power, and ease of doing business
  • Rising purchasing power with GDP per capita (PPP) highest of the new EU members
  • 2nd largest nominal GDP in Central and Eastern Europe after Poland
  • Strategic location in the heart of Europe – next to Germany, Poland
  • Extremely successful in attracting foreign direct investment
  • Strong manufacturing industries, excellent infrastructure
  • Regional headquarters, R&D operations, service centres
  • Educated and skilled labour force

MACROECONOMIC OVERVIEW


The Czech Republic is today considered one of the most stable and prospering countries of Central and Eastern Europe (CEE). Since 1989, it has accomplished a profound transition toward a market driven economy including privatization and restructuring of all its industry and service sectors. Only a handful of companies remain in state ownership, including some utilities, national airlines, post, and a few others. The country has attracted impressive volumes of foreign direct investments and its beautiful capital of Prague has been a most popular destination for millions of tourists every year.


The Czech Republic enjoyed 10 years of continued economic growth up until 2009; however, the small, open, export-driven Czech economy is sensitive to changes in the economic performance of its main export markets, especially Germany, and was severely affected when Western Europe fell into recession in late 2008 and the demand for Czech goods plummeted. After 5 years of mixed economic performance, the year 2014 saw the Czech Republic firmly back on track and the year 2015 saw GDP outperform and growing by 4.2% in y-o-y comparison. The European Commission forecasts the Czech economy will expand by 2.1% and 2.6% in 2016 and 2017, respectively.


In November 2013, the Czech National Bank (CNB) launched a foreign exchange intervention to mitigate the risk of continued deflation and to boost recovery of the national economy. Since then, the CNB has kept the rate at about 27-27.5 Czech crowns/1 euro.



Selected economic indicators, Czech Republic, 2010 – 2016

    2010 2011 2012 2013 2014 2015 2016*
GDP
Real GDP growth
%
2.3
2.0
-0.8
-0.5
2.0
4.2
2.1
GDP at current prices
€ bn
149.93
155.49
152.93
149.49
154.74
163.95
Foreign trade
Exports
€ bn
99.83
113.33
119.33
117.50
129.70
138.51
Imports
€ bn
94.81
106.89
110.76
108.00
119.30
127.97
Balance
€ bn
5.03
6.45
8.56
9.50
10.40
10.54
Prices
CPI - average inflation rate
%
1.2
1.9
3.3
1.4
0.4
0.3
0.5
PPI - industry - average
%
0.1
3.8
2.4
1.1
1.1
-2.5
Employment
Registered unemployment
%
7.3
6.7
7.0
7.0
6.1
5.1
4.5
Average monthly gross wage
938
994
997
964
909
970
Exchange rates
CZK/USD average
19.11
17.68
19.57
19.56
20.75
24.60
CZK/EUR average
25.28
24.59
25.15
25.98
27.53
27.28
*data for 2016 - forecast
Source: Eurostat, International Monetary Fund and Czech National Bank, 2016



KEY SECTORS


Manufacturing generates 25% of GDP, above EU average, which reflects the country’s traditional strengths in industrial production. Apart from traditional sectors, such as automotive production, iron and steel production, metalworking, chemical production, engineering, food industry, and production of textiles and glass, the country has recorded boom in high added value segments, such as biotechnologies and life sciences, precision engineering, nano fibres and specialized information technologies and software. Services remain the top contributor to the economy generating ca. 60% of GDP.


Automotive:
The automotive industry, including manufacture of components, is a crucial part of the Czech economy accounting for 23% of the manufacturing output. The industry includes close to 200 component suppliers, of which most are foreign owned – via acquisitions and green-field & brown-field investments. Automobile-related manufacturing, design and R&D is one of the densest in the world with half of world’s top 50 components producers present in the Czech Republic. Besides its traditional carmaker Skoda (part of VW), the Czech Republic also hosts new plants of TPCA (Toyota/Peugeot/Citroen) and Hyundai, together producing 1 million cars per year.


Electronics and electric products
is another sector with a long tradition, currently ranging from manufacture of components to consumer electronics to avionic radars. The sector is marked by a high proportion of imported materials, components and parts for production and assembly, and a wide range of technological processes.


Plastics
industry is tightly connected to the automotive and electronics sectors, and as such benefited from their boom in the last few years. The plastics and rubber industry belongs among the most significant manufacturing sectors generating approximately 6.5% of total industrial output.


Engineering, machine tools & precision engineering:
Another sector in which the Czech Republic has an excellent reputation with many leading international firms undertaking R&D and engineering product development through local subsidiaries. Major investors include ABB, Parker Hannifin, Ingersoll Rand and Honeywell.


Biotechnology and Life Sciences:
The Czech Republic boasts one of the most developed biotechnology sectors among new EU members with more than 500 entrepreneurial entities. The development of human and veterinary pharmaceuticals, diagnostics, fermentation technologies, and use of biotechnology in waste handling and environment protection are segments in which Czech biotech entities have been successful.


Financial services:
The country has a modern competitive banking sector, now fully in the hands of leading international banks such as KBC, Societe Generale, Erste Bank or UniCredit Group. During the turmoil on the world financial markets, the local banks financed their loans from the deposits of Czech savers; the loan-to-deposit ratio of the Czech banking sector, currently standing at 78%, belongs amongst the lowest in the EU.


Shared services and R&D/technology centres:
The country has been widely recognized by multinational corporations as a primary location for regional expansion as well as for setting up their regional headquarters and has the second largest business support market in the CEE, hosting over 200 shared service centres including Accenture, ExxonMobil, Honeywell, Monster Group, Siemens, SAP, Anheuser-Busch Inbev, Johnson Controls, Covidien and many other.


Tourism:
The Czech Republic is considered as one of the most favourite destinations for tourists due to its historical heritage, spas and resorts as well as mountains. Twelve historical monuments are on the UNESCO heritage list. There are over 200 castles and chateaus, more than 40 protected historical towns, and 36 spa towns. Its capital Prague is the country’s main attraction – in 2015, the city welcomed 6.6 million visitors, of which 5.7 million were foreigners. Total contribution of travel and tourism contribution reaches 8.0% of total GDP (10.0% contribution to employment).



EXPORTS & IMPORTS


The Czech Republic is exceptionally open to international trade – its export/GDP ratio at 83% is one of the highest in Europe, with imports comparably high at EUR 130 billion per year. About 80% of Czech exports go to other EU member states.


2015 export and import data:




Main import partners:
Germany - 26.2%
China - 13.4%
Poland - 7.8%
Slovakia - 5.2%
Russia - 4.0%


Main export partners:
Germany - 32.4%
Slovakia - 9.0%
Poland - 5.8%
UK - 5.3%
France - 5.0%


Czech Republic external trade - 2015




See references for our track record in the Czech Republic.



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