Czech Republic

Economic and political outline

Economic indicators | Foreign Trade in figures | Sources of economic information | Political outline

Economic indicators

Czech Republic is one of the most developed economies of the Central and East Europe. Its economic growth is strongly influenced by demand for exports and inflow of foreign direct investment. The country’s GDP growth rate reached 6.4% in 2006; while as it was 6.1% in 2005 and 4.2% in 2004. National Statistical Office forecasts a slowdown to 5.9% in 2007 and 5.0 in 2008. Domestic demand will drive less dynamicly the economic expansion, and net trade will provide less of a stimulus to growth due to slower import demand in the euro zone. Inflation is still under control (2.9% in 2006) but public funds are phasing out and budget deficit is widening. However, the government has committed itself to reducing the deficit to 3% of GDP by 2008 to meet the Maastricht requirements for adoption of the euro in the year 2010.

GDP Indicators	2004	2005	2006	2007	2008
GDP (billions USD)	109.63	124.99	142.52	168.14e	184.42e
GDP (constant prices, annual % change)	4.6	6.5	6.4	5.6e	4.6e
GDP per capita (USD)	10,752.40	12,218.41	13,883.80	16,371.90e	17,951.35e
Inflation rate (%)	2.8	1.8	2.5	2.9e	4.4e
Unemployment rate (% of the labor force)	n.c.	7.9	7.1	5.3	n.c.
Current Account (billions USD)	-5.74	-2.02	-4.44	-5.72e	-6.46e
Current Account (in % of GDP)	-5.2	-1.6	-3.1	-3.4e	-3.5e

Source: IMF - World Economic Outlook Database; OECD

Note: (e) Estimated data

Socio-demographic indicators	2005	2006	2007
Unemployment rate (%)	7.9	7.1	5.3

Source:

Main sectors of industry

The agriculture sector has gone through a serious of crisis situations in the 90s and is even today highly subsidized. It generates 3.5% of the country’s GDP and employs nearly 4% of the active population. The main agricultural products are sugar beets, potatoes, wheat, barley and hops. The manufacturing sector constitutes 40% of the country’s GDP and is mainly privatized. The performance growth was in addition to an increase in labour productivity driven by employment growth. One of the principal industrial sectors in the country is the automobile sector, with Skoda (Volkswagen company). Foreign investors such as Toyota and PSA have also started producing cars in the Czech Republic from 2005 onwards. However, this sector has now reached a point of saturation. Textile sector is becoming very dynamic. The tourism sector is in full boom, thanks particularly to the city of Prague being a strong tourist attraction centre.

Breakdown of economic activity by sector	Agriculture	Industry	Services
Value added (annual % change)	-7.3	11.5	3.7
Value added (in % of GDP)	2.7	39.3	58.0
Employment by sector (in % of total employment)	4.0	39.5	56.5

Source: World Bank - World Development Indicators - last available data.

Monetary indicators	2002	2003	2004	2005	2006
Average annual exchange rate for 1 USD	32.74	28.21	25.70	23.96	22.60

Source: World Bank - World Development Indicators

Foreign trade in figures

The Czech Republic’s membership of the EU has improved trade owing to the removal of customs and border controls and helped to improve the trade balance; membership made it part of the common market and solidified its position as a low-cost production base. 80% of the country’s trade is now conducted with OECD countries (of which 80% is from EU). A number of agreements facilitate trade with neighbouring states (CEFTA). The country’s main imports are machinery, industrial goods, semi-finished products, and chemicals and natural resources, mainly fossil fuels; within these categories, machinery and transport equipment (mainly cars) accounted for 41%. The main exports are raw materials, semi-finished products and chemicals.

Foreign trade indicators	2002	2003	2004	2005	2006
Imports of goods (millions USD)	40,720	51,224	68,265	76,294	93,197
Exports of goods (millions USD)	38,480	48,705	67,220	77,951	95,119
Imports of services (millions USD)	6,439	7,320	9,218	9,954	11,237
Exports of services (millions USD)	7,083	7,789	9,699	10,800	11,795
Imports of goods and services (annual % change)	5.0	8.0	18.2	4.8	14.2
Exports of goods and services (annual % change)	2.1	7.2	21.1	10.4	14.6
Imports of goods and services (in % of GDP)	62.3	64.1	71.6	69.8	73.5
Exports of goods and services (in % of GDP)	60.2	61.8	71.0	71.7	75.3
Trade Balance (millions USD)	-2,240	-2,519	-1,046	1,657	1,922
Trade Balance (including service) (millions USD)	-1,597	-2,049	-565	2,503	2,480
Current Account (millions USD)	-4,265	-5,785	-6,538	-3,143	-6,052
Current Account (in % of GDP)	-5.7	-6.3	-6.0	-2.5	-4.3
Foreign trade (in % of GDP)	122.5	125.8	142.6	141.5	148.9

Source: World Bank - World Development Indicators

Main partner countries

Main customers (% of exports)	2006
Germany	31.9%
Slovakia	8.4%
Poland	5.7%
France	5.5%
Austria	5.1%

Main suppliers (% of imports)	2006
Germany	28.5%
China	6.1%
Russia	6.0%
poland	5.6%
Slovakia	5.4%

Source: 2006

Main products

Main exports (% of exports)	2006
Machinery and mechanical appliances	20.5%
Vehicles other than railway or tramway	17.0%
Electrical machinery and equipment	14.6%
Articles of iron or steel	4.9%
Iron and steel	3.7%

Main imports (% of imports)	2006
Machinery and mechanical appliances	17.0%
Electrical machinery and equipment	15.2%
Mineral fuels, mineral oils	9.0%
Vehicles other than railway or tramway	8.6%
Plastics	5.5%

Source: 2006

To see more products: More imports (Intracen Data)
More exports (Intracen Data)

Sources of 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
Online newspapers: Lidové Noviny ( in Czech only ), daily
Hospodárské noviny (in Czech only), daily
MF DNES (in Czech only), daily
Právo (in Czech only), daily
EKONOM (in Czech only), weekly
The Prague Post
The Prague Tribune
Prague Business Journal
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

Political outline

Executive Power: President is the chief of the state and is elected by the parliament 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 programme to suit country's new democratic politics;
- KDU-CSL (Christian Democratic Union-Czechoslovak People's Party) – 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: Vaclav KLAUS (since March 2003) – ODS
Prime Minister: Mirek TOPOLANEK (since january 2007) – ODS
Next election dates: Presidential: 2013
Chamber of Deputes: June 2010