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flag Czech Republic Czech Republic: Economic and Political Outline

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline

 

Economic Indicators

The Czech Republic's economy is one of the most developed in Central and Eastern Europe, but it is very vulnerable to external shocks due to its dependency on exports and FDI inflows. The year 2013 was the third consecutive year of the economy undergoing a recession (--0.4%), the result of the government's austerity policy. A resumption of growth is expected in 2014 (1.3%).

After four consecutive years of severe austerity, the economy plunged into a deep recession and the citizens' morale is at a low. Both household consumption and state investment collapsed, a decline in purchases lead to a decline in industrial production, the levels of national debt continue to soar, and the budget deficit remains at around 3% only at the price of a VAT increase, lower salaries of civil servants, freezing pensions and under-investment in key sectors such as education, research and infrastructure. The National Bank devalued the national currency by 5% and has massively intervened on the exchange market in order to avoid deflation. Due to a policy of austerity which many consider excessive, the public deficit has been reduced to under 3% of the GDOP and the debt is less than 50% of the GDP. The 2014 budget plans of increasing the deficit, yet keep it under the 3% limit set by the EU. The government has been trying to boost consumption and exports. Its long-term goal is to make the Czech Republic one of the world's twenty most competitive economies by 2020, by 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, stands at around 10% of the active population. Real income dropped by 2% in 2012.

 
Main Indicators 20112012201320142015 (e)
GDP (billions USD) 216.06196.45198.45200.01208.87
GDP (Constant Prices, Annual % Change) 1.8-1.0-0.92.52.5
GDP per Capita (USD) 20,60318,6991818,985e19,796
General Government Balance (in % of GDP) -3.2-1.9-0.6-0.6-1.2
General Government Gross Debt (in % of GDP) 41.446.246.044.444.4
Inflation Rate (%) 1.93.31.4e0.61.9
Unemployment Rate (% of the Labor Force) 6.77.07.06.46.0
Current Account (billions USD) -6.35-2.55-2.85-0.40-0.62
Current Account (in % of GDP) -2.9-1.3-1.4e-0.2-0.3

Source: IMF - World Economic Outlook Database , Last Available Data

Note: (e) Estimated Data

Main Sectors 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). Since 2005, other foreign investors, such as Toyota and PSA, have also been manufacturing cars in the Czech Republic.  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 almost 60% of the active population. The tourism sector is booming, thanks to the city of Prague, in particular, which is a very attractive tourist center.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 3.1 38.1 58.8
Value Added (in % of GDP) 2.6 36.7 60.7
Value Added (Annual % Change) -9.0 -2.6 1.1

Source: World Bank - Last Available Data.

 
 
 
Monetary Indicators 20092010201120122013
Czech Crown (CZK) - Average Annual Exchange Rate For 1 USD 19.0619.1017.7019.5819.57

Source: World Bank - Last Available Data.

 
 

Learn more about Market Analyses about the Czech Republic on Globaltrade.net, the Directory for International Trade Service Providers.

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labor freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
72.2/100
Position:
Mostly Free
World Rank:
26/178
Regional Rank:
15/43

Distribution of Economic freedom in the world
Source: 2014 Index of Economic freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
7.31
World Rank:
28/82

Source: The Economist - Business Environment Rankings 2014-2018

 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

The Czech Republic's economy is very open to foreign investment. Trade represented over 140% of the GDP in 2010-2012. 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. Exports benefit from the good state of the German economy, which accounts for a third of the country's foreign trade. In 2013, the trade surplus increased with exports rising by 2.8% compared to 2012 and imports increasing by 1.4%.

 
Foreign Trade Indicators 20092010201120122013
Imports of Goods (million USD) 105,048126,652152,125141,412143,348
Exports of Goods (million USD) 112,956132,981162,939156,569161,366
Imports of Services (million USD) 18,73116,88019,74419,44119,459
Exports of Services (million USD) 20,21120,87823,10222,02822,710
Imports of Goods and Services (Annual % Change) -11.014.96.72.40.3
Exports of Goods and Services (Annual % Change) -9.814.89.34.10.3
Imports of Goods and Services (in % of GDP) 54.963.167.771.671.4
Exports of Goods and Services (in % of GDP) 58.866.271.676.577.2
Trade Balance (million USD) 3,6332,1384,2186,9429,010
Trade Balance (Including Service) (million USD) 8,4866,7338,43010,78812,311
Foreign Trade (in % of GDP) 113.7129.3139.3148.1148.6

Source: WTO - World Trade Organization ; World Bank , Last Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2013
Germany 31.3%
Slovakia 8.9%
Poland 6.0%
France 4.9%
United Kingdom 4.9%
See More Countries 44.1%
Main Suppliers
(% of Imports)
2013
Germany 25.9%
China 10.9%
Poland 7.5%
Slovakia 5.7%
Russia 5.4%
See More Countries 44.5%

Source: Comtrade, Last Available Data

 
 

Main Products

- bn USD of products exported in 2013
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 9.5%
Parts and accessories for tractors, motor vehicles...Parts and accessories for tractors, motor vehicles for the transport of ten or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705, n.e.s. 7.2%
Automatic data processing machines and units...Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, n.e.s. 6.0%
Insulated incl. enamelled or anodised wire, cable...Insulated incl. enamelled or anodised wire, cable incl. coaxial cable and other insulated electric conductors, whether or not fitted with connectors; optical fibre cables, made-up of individually sheathed fibres, whether or not assembled with electric conductors or fitted with connectors 1.7%
Transmission apparatus for radio-telephony,...Transmission apparatus for radio-telephony, radio-telegraphy, radio-broadcasting or television, whether or not incorporating reception apparatus or sound recording or reproducing apparatus; television cameras; still image video cameras and other video camera recorders; digital cameras 1.7%
See More Products 73.9%
- bn USD of products imported in 2013
Parts and accessories for tractors, motor vehicles...Parts and accessories for tractors, motor vehicles for the transport of ten or more persons, motor cars and other motor vehicles principally designed for the transport of persons, motor vehicles for the transport of goods and special purpose motor vehicles of heading 8701 to 8705, n.e.s. 5.2%
Automatic data processing machines and units...Automatic data processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, n.e.s. 4.4%
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals, crude 3.8%
Petroleum gas and other gaseous hydrocarbonsPetroleum gas and other gaseous hydrocarbons 2.8%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses incl. those in the form of transdermal administration or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 2.1%
See More Products 81.6%

Source: Comtrade, Last Available Data

 
See More Products
More imports (Intracen Data)
More exports (Intracen Data)
 
 
 

Main Services

- bn USD of services exported in 2011
33.06%
26.17%
23.68%
7.74%
3.70%
2.22%
1.28%
1.10%
0.46%
0.39%
0.19%
- bn USD of services imported in 2011
27.69%
24.66%
23.55%
6.64%
5.12%
4.89%
2.78%
2.50%
1.31%
0.51%
0.36%

Source: Comtrade, Last Available Data

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Sources of General Economic Information

Ministries
Ministry of Agriculture
Ministry of Foreign Affairs
Ministry of Industry and Trade
Ministry of Finance
Statistical Office
Czech National Statistical Office  
Central Bank
Czech National Bank  
Stock Exchange
Prague Stock Exchange
Czech capital market association
Search Engines
Atlas
Best
Katalog
O² Active
Superzoznam
Surf
Economic Portals
Czech Happenings, Czech Press Bureau (in Czech and in English)
Businessinfo.cz, Czech business web portal
Financni Noviny, News in English

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Political Outline

Executive Power
President is the chief of the state and is elected by direct universal suffrage for a five-year term. President has limited specific powers, most important of them being power to return laws to the parliament and dissolving of the parliament under certain special conditions. President appoints the Prime Minister and the Cabinet on the recommendation of the Prime Minister. Prime Minister is the head of the government and also holds the executive powers which include implementation of the law in the country and running the day-to-day affairs. Prime Minister is generally the head of the majority party or coalition in the parliament and yields considerable political power.
Legislative Power
The legislature is bicameral. The parliament consists of: Senate (the upper house), its members elected by popular vote to serve six-year terms and the Chamber of Deputies (the lower house) with its members elected by popular vote to serve four-year terms. The executive branch of government is directly or indirectly dependent on the support of the parliament, often expressed through a vote of confidence Prime Minister cannot dissolve the parliament without taking President and the members of the parliament into confidence.
Main Political Parties
Czech Republic has a multi-party political system. The main political parties in the country are:
- CSSD (Czech Social Democratic Party) – defends a socially oriented state with a market economy;
- ODS (Civic Democratic Party) – a liberally conservative party, on the right of the political spectrum. It defends the principles of personal freedom and individual responsibility, entrepreneurship and private ownership;
- KSCM (Communist Party of Bohemia and Moravia) - heir of the Communist party of Czechoslovakia, though it has now modified its program to suit country's new democratic politics;
- KDU CSL – a conservative political party which draws its main support from the Catholic rural areas in Moravia, in the center of the political spectrum ;
- Green Party (SZ) - highlights through its program the topic of ecology.
Current Political Leaders
President: Miloš Zeman (since March 2013) – SPOZ
Prime Minister: Bohuslav SOBOTKA (since 17 January 2014) – Social Democrat Party (CSSD)
Next Election Dates
Presidential: February 2018
Chamber of Deputies: 2017
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures the violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire sent to partner organizations,150 RWB correspondents, journalists, researchers, jurists and activists of human rights, including the main criteria - 44 in total - to assess the situation of press freedom in a given country. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
13/180
Evolution:
3 places up compared to 2013

Source: Worldwide Press Freedom Index 2014, Reporters Without Borders

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Free
Political Freedom:
1/7

Map of freedom 2014
Source: Freedom House

 

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Last Updates: October 2014