Economy of the Czech Republic
| Economy of the Czech Republic | | Currency | 1 Czech koruna (Kč) |
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| Fiscal year | calendar year |
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| Trade organizations | EU, WTO and OECD |
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| Statistics |
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| GDP ranking | 39th by nominal volume; 39th by nominal volume per capita; 41st by volume adjusted for PPP; 36th per capita adjusted for PPP (2004) |
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| GDP PPP | $187.5 billion (2004) |
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| GDP growth rate | 6.0% (2005) |
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| GDP per capita | $19,488 (2005 est.) |
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| GDP by sector | agriculture (3.4%), industry (39.3%), services (57.3%) (2004) |
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| Inflation rate | 1.9% (2005) |
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| Pop below poverty line | N/A |
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| Labour force | 5.25m (2004) |
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| Labour force by occupation | services (58%), industry (38%), agriculture (4%) (2002) |
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| Unemployment | 7.9% (2005) |
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| Main industries | motor vehicles and parts, machine tools, electric power equipment, metals, chemicals, coal, food processing, glass, beverages, tourism |
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| Trading partners |
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| Exports | $66.5bn (2004) |
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| Main partners | Germany 36.1%, Slovakia 8.4%, Austria 6%, Poland 5.3%, UK 4.7%, France 4.7%, Italy 4.3%, Netherlands 4.3% (2004) |
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| Imports | $68.2bn (2004) |
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| Main partners | Germany 31.7%, Slovakia 5.4%, Italy 5.3%, People's Republic of China 5.2%, Poland 4.8%, France 4.8%, Russia 4.1% (2004) |
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| Public finances |
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| Public debt | 33.1% of GDP (2005) |
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| External debt | $43.2bn (30 June 2005 est.) |
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| Revenues | $48.16bn (2005 est.) |
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| Expenses | $53.04bn (2005 est.) |
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| Economic aid | $2.4bn from EU funds (2004-06) |
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Of the emerging democracies in
central and
eastern Europe, the
Czech Republic has one of the most developed industrialized
economies. It is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe.
The principal industries are heavy and general machine-building,
iron and
steel production, metalworking,
chemical production,
electronics, transportation equipment,
textiles,
glass, brewing, china,
ceramics, and
pharmaceuticals. Its main agricultural products are
sugarbeets,
fodder roots,
potatoes,
wheat, and
hops.
Its strong industrial tradition dates to the
19th century, when
Bohemia and
Moravia were the economic heartland of the
Austro-Hungarian Empire. Today, this heritage is both an
asset and a
liability. The Czech Republic has a well-educated population and a well-developed
infrastructure, but its industrial plants and much of its industrial equipment are obsolete.
According to the
Stalinist development policy of planned interdependence, all the economies of the
socialist countries were linked tightly with that of the
Soviet Union. With the disintegration of the communist economic alliance in
1991, Czech manufacturers lost their traditional markets among former communist countries to the east.
The "
Velvet Revolution" in
1989 offered a chance for profound and sustained economic reform. Signs of economic resurgence began to appear in the wake of the shock therapy that the
International Monetary Fund (IMF) labelled the "big bang" of January 1991. Since then, astute economic management has led to the liberalization of 95% of all price controls, annual inflation in the 10% range, modest
budget deficits, low
unemployment, a positive
balance of payments position, a stable
exchange rate, a shift of exports from former
communist economic bloc markets to
Western Europe, and relatively low
foreign debt.
Particularly impressive have been the republic's strict
fiscal policies. Following a series of currency
devaluations, the
crown has remained stable in relation to the
U.S. dollar. The Czech crown became fully
convertible for most business purposes in late
1995.
In addition, the government has revamped the legal and administrative structure governing
investment in order to stimulate the economy and attract foreign partners. Shifting emphasis from the East to the West has necessitated restructuring existing facilities in banking and telecommunications as well as adjusting commercial laws and practices to fit Western standards. The republic has made progress toward creating a stable investment climate.
This success has enabled the Czech Republic to become the first post-communist country to receive an investment-grade credit rating by international credit institutions. Successive Czech governments have welcomed
U.S. investment, in particular, as a counter-balance to the strong economic influence of Western Europe, especially of their powerful neighbour,
Germany. Although
foreign direct investment (FDI) runs in uneven cycles, with a 12.9% share of total FDI between 1990 and March 1998, the U.S. was the third-largest foreign investor in the Czech economy, behind Germany and the
Netherlands.
The republic boasts a flourishing consumer production sector and has
privatized most state-owned heavy industries through the
voucher privatization system. Under the system, every citizen was given the opportunity to buy, for a moderate price, a book of vouchers that represents potential shares in any state-owned company. The voucher holders could then invest their vouchers, infusing the chosen company with valuable capital. State ownership of businesses was estimated to be about 97% under
communism. In
1998, more than 80% of enterprises are in private hands. When the voucher privatization process is complete, Czechs will own shares of each of the Czech companies, making them one of the highest per capita share owners in the world. Privatization through restitution of real estate to the former owners was largely completed in 1992.
The republic's economic transformation is far from complete. A recession in 1998 revealed that the government still faces serious challenges in completing industrial restructuring, increasing
transparency in
capital market transactions, fully
privatizing the
banking sector, transforming the
housing sector, privatizing the
health care system, and solving serious environmental problems.
Political and financial crises in
1997 shattered the Czech Republic's image as one of the most stable and prosperous of post-Communist states. Delays in enterprise restructuring and failure to develop a well-functioning capital market played major roles in Czech economic troubles, which culminated in a currency crisis in May. The currency was forced out of its fluctuation band as investors worried that the current account deficit, which reached nearly 8% of
GDP in
1996, would become unsustainable. After expending $3
billion (3 G$) in vain to support the currency, the central bank let it float. The growing current account imbalance reflected a surge in domestic demand and poor export performance, as wage increases outpaced productivity. The government was forced to introduce two
austerity packages later in the spring (called vernacularly "The Packages"), which cut government spending by 2.5% of
gross domestic product. Growth dropped to 0.3% in 1997, -2.3% in 1998, and -0.5% in 1999. The basic transition problem continues to be too much direct and indirect government influence on the privatized economy. The government established a restructuring agency in 1999 and launched a revitalization program - to spur the sale of firms to foreign companies. Key priorities include accelerating legislative convergence with
EU norms, restructuring enterprises, and privatizing banks and utilities. The economy, fuelled by increased export growth and investment, is expected to recover in 2000.
Growth in 2000-05 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. Current account deficits of around 5% of GDP are beginning to decline as demand for Czech products in the European Union increases. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned telecommunications firm Cesky Telecom took place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth.
The Czech Republic is reducing its dependence on highly polluting low-grade
brown coal as a source of energy.
Nuclear energy presently provides about 30 % of total power needs, and its share is projected to increase to 40%.
Natural gas is procured from
Russian
Gazprom (roughly two-thirds of domestic consumption) and from
Norwegian companies (the remaining one-third). Russian gas is imported via Ukraine (Brotherhood pipeline), Norwegian gas is transported through
Germany. The gas consumption (approx. 100 TWh in 2003-5) is almost two times higher than the electricity consumption.
From the CIA World Factbook 2006Household income or consumption by percentage share: (1996)
lowest 10%: 4.3%
highest 10%: 22.4%
Industrial production growth rate: 11% (2004)
Electricity - production: 78.18 GWh (2003)
Electricity - production by source:fossil fuel: 75.54%
hydro: 2.55%
nuclear: 20.37%
other: 1.54% (1998)
Electricity - consumption: 56.5 GWh (2003)
Electricity - exports: 26.3 GWh (2003)
Electricity - imports: 10.1 GWh (2003)
Oil - production: 12,380 bbl/day (2003)
Oil - consumption: 185,200 bbl/day (2003 est.)
Oil - exports: 26,670 bbl/day (2001)
Oil - imports: 192,300 bbl/day (2001)
Oil - proved reserves: 17.25 million bbl (1 January 2002)
Natural gas - production: 133 million m
3 (2003 est.)
Natural gas - consumption: 9.623 billion m
3 (2003 est.)
Natural gas - exports: 1 million m
3 (2001 est.)
Natural gas - imports: 9.521 billion m
3 (2001 est.)
Natural gas - proved reserves: 3.964 billion m
3 (1 January 2002)
Natural resources: coal, timber, lignite, uranium, magnesite.
Agriculture - products:wheat, rye, oats, corn, barley, potatoes, sugar beets, hops, fruit; pigs, cattle, poultry, horses; forest products
Exports - commodities:machinery and transport equipment 52%, chemicals 5%, raw materials and fuel 9% (2003)
Imports - commodities:machinery and transport equipment 46%, raw materials and fuels 15%, chemicals 10% (2003)
Exchange rates:koruny (Kč) per US$1 - 23.957 (2005), 25.7 (2004), 28.2 (2003), 32.7 (2002), 38.0 (2001), 38.6 (2001), 34.6 (1999), 32.3 (1998), 31.7 (1997), 27.1 (1996), 26.5 (1995)
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Prague Stock Exchange*
Economy of Europe*
OECD Economic Survey of the Czech Republic*
OECD's Czech Republic country Web site*[https://www.cia.gov/cia/publications/factbook/geos/ez.html CIA - The World Factbook -- Czech Republic]
*
Current economic data
