Czech Republic: Economic and Political Outline

Economic Overview

The Czech Republic's economy is one of the most developed in Central and Eastern Europe. After experiencing a sharp drop in 2009 (-4.2%) due to the global recession, the country resumed growth in 2010 (2%). However, there was again a slowdown in 2011 (1.7%) and the situation should deteriorate further in 2012 (around 0.2%) due to the difficulties faced by the country's trading partners in the eurozone. The country's economic growth is strongly influenced by the demand of exports and the FDI inflow.

Despite the new worsening of the economic climate, the government intends to continue the austerity measures aimed at fiscal consolidation. New budget cuts were announced in January to bring the budget deficit below 3% of GDP by 2013, with the idea of meeting the Maastricht criteria. A reform of the health system and pensions is also planned. The long-term goal is to make the Czech Republic one of the world's twenty most competitive economies by 2020, 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, remains at around 7% of the active population.

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).  Foreign investors such as Toyota and PSA also started producing cars in the Czech Republic since 2005.  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 more than half of the active population.  The tourism sector is booming, thanks to the city of Prague, in particular, which is a very attractive tourist center.

Source: World Bank - Last Available Data.

Indicator of Economic Freedom

Score:

70.4/100

Position:

Mostly free

World Rank:

28/179

Regional Rank:

15/42

Distribution of Economic freedom in the world
Source: 2011 Index of Economic freedom, Heritage Foundation

Note: 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.

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

Other Useful Resources

Czech Republic, Official website of the Czech Republic

Main 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

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

Type of State

Republic state based on parliamentary democracy.

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: Petr NECAS (since June 2010) – ODS

Next Election Dates

Presidential: February 2013
Chamber of Deputies: 2014

Indicator of Freedom of the Press

World Rank:

14/179

Evolution:

10 places up compared to 2010

Source: Worldwide Press Freedom Index 2011, Reporters Without Borders

Note: 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 is 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.).