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Economy

Economic improvement

In recent years, the Czech economy has gone from strength to strength; indeed it is one of the most stable and prosperous of the post–Communist states of Central and Eastern Europe. Interest rates and inflation have been reduced while exports and output growth have increased. There are several factors that underly this ongoing improvement: consumer spending, high levels of foreign direct investment and the country’s EU accession into the EU in 2004.

Adopting the euro

The Czech Republic is preparing to join the euro zone in 2010, but it is widely accepted that it must bring public spending under control before this is possible.The country’s accession to the EU has given continued direction to structural reform.

International trade

The Czech Republic’s principal trading partners are the UK, Germany, France, Austria and Slovakia. A number of international companies have regional offices in the Czech Republic and some have their headquarters in the country. Shell, Tesco and Unilever are among the heavy investors.

Strong GDP growth

GDP growth has been strong in recent years. In 2005 it was 4.1% (both in absolute and per capita terms), in 2004 it was 4.4%, and in 2003 3.2%. Current GDP growth is 6.1% (2006 estimate); some analysts are forecasting GDP growth for 2007 to be 5%. The country’s GDP purchasing power parity is $224 billion (2006 estimate).

Inflation and unemployment

Inflation is at a current rate of 2.7% (2006 estimate), a vast improvement from the 10.7% registered in 1998. The unemployment rate declined slightly in 2005, which was the first year–on–year decline since 2000. It currently stands at 8.4% (2006 estimate).

Domestic demand

Demand from the domestic sector is becoming more important role in aiding growth in the Czech Republic. Credit cards and mortgages are becoming more widely available to Czechs. The current account deficit has declined to around 3% of GDP as demand for Czech products in the EU has increased.

Interest rates set to rise

The central bank raised its key interest rate by 25 basis points in July. Further rate rises are forecast, as increases in regulated prices and strong domestic demand are expected to result in an acceleration in consumer price inflation in the short term.

Related items

Documents and Reports

	Czech Republic property investment report (360Kb)
Documents and Reports

Other related pages

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