At the close of World War I, the Czechs and Slovaks of the former Austro-Hungarian Empire merged to form Czechoslovakia. During the interwar years, having rejected a federal system, the new country's predominantly Czech leaders were frequently preoccupied with meeting the increasingly strident demands of other ethnic minorities within the republic, most notably the Slovaks, the Sudeten Germans, and the Ruthenians (Ukrainians). On the eve of World War II, Nazi Germany occupied the territory that today comprises Czechia, and Slovakia became an independent state allied with Germany. After the war, a reunited but truncated Czechoslovakia (less Ruthenia) fell within the Soviet sphere of influence. In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's leaders to liberalize communist rule and create "socialism with a human face," ushering in a period of repression known as "normalization." The peaceful "Velvet Revolution" swept the Communist Party from power at the end of 1989 and inaugurated a return to democratic rule and a market economy. On 1 January 1993, the country underwent a nonviolent "velvet divorce" into its two national components, the Czech Republic and Slovakia. The Czech Republic joined NATO in 1999 and the European Union in 2004. The country changed its short-form name to Czechia in 2016.
Central Europe, between Germany, Poland, Slovakia, and Austria
hard coal, soft coal, kaolin, clay, graphite, timber, arable land
Population - distribution
a fairly even distribution throughout most of the country, but the northern and eastern regions tend to have larger urban concentrations
Czech (official) 95.4%, Slovak 1.6%, other 3% (2011 census)
PRAGUE (capital) 1.314 million (2015)
- Conventional long form
- Czech Republic
- Conventional short form
- Local long form
- Ceska republika
- Local short form
- Geographic coordinates
- 50 05 N, 14 28 E
- Time difference
- UTC+1 (6 hours ahead of Washington, DC, during Standard Time)
- Daylight saving time
- +1hr, begins last Sunday in March; ends last Sunday in October
has not submitted an ICJ jurisdiction declaration; accepts ICCt jurisdiction
Czechia is a prosperous market economy that boasts one of the highest GDP growth rates and lowest unemployment levels in the EU, but its dependence on exports makes economic growth vulnerable to contractions in external demand. Czechia’s exports comprise some 80% of GDP and largely consist of automobiles, the country’s single largest industry. Czechia acceded to the EU in 2004 but has yet to join the euro-zone. While the flexible koruna helps Czechia weather external shocks, its central bank (Czech National Bank - CNB) has since November 2013 intervened in the foreign exchange markets to cap the value of the koruna at 27/Euro, with a 2% inflation target. This intervention has also helped to keep exports competitively priced. After inflation exceeded the bank's 2% target in early 2017, the CNB indicated it expects to end its intervention in the first half of 2017, though it will continue to intervene as necessary to maintain stability of the currency.
- Total tax rate (% of commercial profits)
- Real Interest Rate
- Manufacturing, value added (% of GDP)
- Current Account Balance
- US$ 2,138,782,863
- Labor Force, Total
- Employment in Agriculture
- Employment in Industry
- Employment in Services
- Unemployment Rate
- Imports of goods and services
- US$ 140,782,804,088
- Exports of goods and services
- US$ 154,999,260,090
- Total Merchandise Trade
- FDI, net inflows
- US$ 6,497,344,244
- Commercial Service Exports
- US$ 23,886,932,789
wheat, potatoes, sugar beets, hops, fruit; pigs, poultry
motor vehicles, metallurgy, machinery and equipment, glass, armaments
- machinery and transport equipment, raw materials, fuel, chemicals
- Germany 32.4%, Slovakia 9%, Poland 5.8%, UK 5.3%, France 5.1%, Italy 4.3%, Austria 4.1% (2015)
- machinery and transport equipment, raw materials and fuels, chemicals
- Germany 26.4%, China 12.4%, Poland 8.3%, Slovakia 5.1%, Italy 4.2% (2015)
- Country Risk Rating
- The political and economic situation is good. A basically stable and efficient business environment nonetheless leaves room for improvement. Corporate default probability is low on average.
- Business Climate Rating
- The business environment is good. When available, corporate financial information is reliable. Debt collection is reasonably efficient. Institutions generally perform efficiently. Intercompany transactions usually run smoothly in the relatively stable environment rated A2.
- Central geographic position, at the heart of industrial Europe
- Strongly integrated into the international, particularly German, production chain
- Preferential destination for foreign direct investments in Central Europe
- Considerable industrial potential
- Sound public accounts and banking system
- Low external energy dependence
- Small, very open economy: exports account for 84% of GDP
- Highly dependent on European demand: 63% of exports are to the Eurozone, one third to Germany
- Automotive occupies large share of the economy
- Lack of rapid transport links with the rest of Europe
- Aging population and lack of skilled workforce
After exceptional performance in 2015 following a surge in public investment due to the need to use the remaining funds available under the European funding program, which was reaching maturity, growth returned to a pace in line with potential in 2016. In 2017, household demand will remain buoyant, carried by the dynamism of the job market and wages, the availability of abundant and cheap credit, as well as the introduction of family benefits aimed at boosting the birth rate. With 2017 being an election year, fiscal largesse cannot be ruled out. External demand will benefit from robust consumption and German exports, as well as from the healthy state of the European automotive market on which the country greatly depends. Because of the large share of exports in the Czech economy, this will impact positively on jobs and household demand. However, if the lower limit on the koruna against the euro, in force since November 2013 is abandoned, the resulting appreciation could lead to slower exports and faster import growth, which would reduce trade's contribution to growth. Automotive, which accounts for 28% of industrial production, 20% of exports of goods and 10% of GDP, are expected to continue to prosper. As for construction, it is expected to benefit from the return to normal regarding European funding, which will generate an average annual surplus of 2% of GDP until 2022.
In two years (2013-2014) of austerity, the Czech government has restored its public finances. The fiscal deficit fell below 1%. Despite a slight easing expected in 2017 (increase in civil service salaries and pensions, recruitment of more teachers …), no doubt linked to the holding of elections in 2017, the position will remain satisfactory. The debt burden, already moderate, will continue to fall. Despite the influx of foreign capital, attracted by the prospect of an appreciation of the koruna, 75% will still be held by local investors. This success explains why 80% is denominated in koruna and issued at negative rates on short maturities.
The trade balance runs a structural surplus (4.7% of GDP in 2015) thanks to the strong integration of Czech industry into the European production chain, especially that of Germany, and automotive. Engineering, household appliances and electrical equipment also make a positive contribution. Services generate a small surplus (1.7%) thanks to tourism. The income deficit (5.5%) is explained by the considerable stock of FDIs. Together these factors make for a slight current account surplus, which could be affected by a fall in the trade surplus. The potential for it to deteriorate is, however limited, as a drop in exports would be accompanied by a drop in imports and dividend repatriations. Moreover, European funds and foreign capital would easily help cover any deterioration. Despite its significant level (70.7% of GDP), the external debt presents a low risk. It is now stable and is in large part composed of intragroup commitments, loans linked to FDIs, short-term commercial loans and deposits made by foreign banks with their local subsidiaries (87% of bank assets), which by their nature are fairly fixed. Allowing for these commitments, the external debt level is only 37.5%.
The electoral law, which includes a high element of proportional representation, means there is no clear majority, forcing the formation of multi-party coalition governments. But, despite frequent disagreement within government, Parliament generally sits for the full term, if need be, thanks to the formation of a technocratic government. This is because 3/5 of the votes are needed to ask the President to dissolve the Chamber. Furthermore, the Communist Party, traditionally the third political force in the country, is systematically excluded from the national coalitions. Accordingly, following the corruption scandals which tainted the previous center-right majority, the early parliamentary elections of October 2013 brought to power a coalition dominated by the Social Democratic Party (CSSD) and the centrist anti-corruption party, the ANO 2011, with the office of prime minister and deputy prime minister in charge of finance being held by their respective leaders: Bohuslav Sobotka and Andrej Babis, a media magnate with significant assets in the chemical and food industries too. Despite the tensions over differences on fiscal policy, the timetable for adopting the euro, the acceptance of refugees, Andrej Babis's conflicts of interest and the ANO's victory in the October 2016 regional elections, the coalition is expected to last until the elections in October 2017.