Among the former socialist countries of Eastern Europe, the Czech Republic is the second most developed after Slovenia. In recent years, the Czech Republic has been one of the most stable, successful and fastest growing in the European Union. The main driver of gross domestic product growth remains domestic consumption and investment. The Czech economy is briefly described in this article.
general information
The country is located in Central Europe, bordered by Poland, Germany, Austria and Slovakia. It is a parliamentary republic in the form of government. The population of the Czech Republic is approximately 10.5 million people (84th place in the world). The country's territory covers an area of 78, 866 square meters. km, which is 0.05% of the total world territory.
In a fairly close historical past, the Czech Republic was part of the Austro-Hungarian Empire. At the end of World War I, Czechs and Slovaks formed Czechoslovakia. On the eve of World War II, Nazi Germany occupied the territory of a modern state. After the war, socialist Czechoslovakia was formed. In 1989, democratic reforms began, and the economy of the Czech Republic and Slovakia was again returned to market principles. In 1993, a common country was finally and peacefully divided into national republics. The Czech Republic joined NATO in 1999 and joined the European Union in 2004.
General overview of the Czech economy
The country has a thriving market economy, with one of the highest GDP growth rates. In the first quarter of 2018, it amounted to 4.4%. It belongs to post-industrial countries with a predominant service sector (60.8%), the second largest sector - industry - 36.9%. Small but well-equipped agriculture accounts for 2.3%.
Here, the unemployment rate is quite low among EU countries. The structure of the Czech economy is heavily dependent on exports, which makes its development highly dependent on declining demand in the global market. The country's exports account for approximately 80% of GDP, with the main items: automobiles, industrial equipment, raw materials, fuels and chemicals.
Some indicators
The country's GDP in 2017 was $ 191.61 billion (48th place in the world). The Czech Republic provides about 0.3% of global gross output. PPP GDP per capita corresponds to 33, 756.77 dollars (39th place, Slovakia - 41st place).
The peculiarity of the Czech economy is that, despite the fact that the country is a member of the EU, it has not yet joined the Eurozone and retains the kroon with its currency. A flexible course helps withstand external shocks. And the krone was considered one of the strongest currencies in the world in 2017. In terms of living standards, the Czech Republic is very close to the most economically developed countries of the European Union. The average monthly income per person is approximately 10, 300 kroons (about 500 US dollars).
Economic policy
The last government of the country continued to carry out some reforms aimed at reducing corruption, attracting foreign investment and improving the social security system. All these measures should increase the income received by the state and improve the living conditions of the population. The Czech economy will receive additional incentives for growth.
In 2016, the opportunity to submit tax reporting via the Internet was introduced, which is aimed at reducing the level of tax evasion and increasing budget revenues. Further liberalization of the economy of modern Czech Republic is planned. The government will reduce labor market restrictions to improve the business climate. Public procurement procedures will be brought into line with EU best practices.
Some problems
One of the lowest unemployment levels in the Czech economy has led to a constant increase in wages. And the state is facing a shortage of reasonably inexpensive labor. Businesses seek to force the government to lower barriers to ensure a large migration of skilled labor. Especially from the countries of Central Europe and Ukraine. The country's main problem is a strong dependence on the export of industrial goods, the majority (85.2% of the total) of which are sold to the countries of the European Union.
The long-term problems of the Czech economy, business in particular, include the need to diversify industrial production into a more high-tech, service and knowledge-based economy. As in all developed European countries, it is urgently necessary to take measures to reduce the rate of aging of the population. Despite the ongoing market reforms, the country still has a backward education system that overlaps with a shortage of skilled workers. Serious problems are the need to finance an outdated pension system and healthcare.
International trade
In terms of international trade, the Czech economy ranks 30th in the world. The country's share in world foreign trade is: export - about 0.5%, import - 0.6%. Since the industry has a significant bias towards the export-oriented orientation, the situation in the EU market, which is the country's main trading partner, has a significant influence on its development. And above all, from Germany - the largest trading and investment partner of the Czech Republic. German consumers buy Czech goods for $ 46 billion, followed by Slovakia ($ 11.1 billion) and the United Kingdom ($ 7.67 billion). The main export items are automobiles, spare parts for cars, computers and telephones.
The country's imports amounted to approximately 140 billion, the Czech Republic has a positive balance of foreign trade. Most of the country buys goods in Germany ($ 37.9 billion), China ($ 17.3 billion) and Poland ($ 11.7 billion).
Financial system
The monetary unit of the Czech Republic is the kroon; 1 kroon contains 100 hellers. Since 1995, the currency has become fully convertible. Unlike most post-communist countries, the Czech Republic managed to avoid hyperinflation and a strong devaluation of the national currency. After some weakening of the Czech koruna at the end of 1990 in subsequent years, the exchange rate began to grow significantly, which became a significant problem for the country's export-oriented business due to a decrease in the competitiveness of products on international markets. Many experts believe that switching to the euro can solve this problem.
The Czech economy is a recipient of the European Union, receiving more from the single European budget than listing it. Many economists write that in connection with the British exit from the EU, the country needs to prepare to live without subsidies. They believe that the level of savings will allow to exist due to internal financing. The population now has enough savings to become a source of investment.
Population income
In the Czech Republic, net adjusted family income after taxes per capita is $ 21, 103 per year. This is lower than the OECD average of $ 30, 563. In the country there is a significant difference in income between the poorest and the richest. The incomes of 20% of the wealthy part of the population are almost four times higher than the incomes of the 20% of its poorest representatives.
The average salary in the Czech economy is about a thousand euros, which is less than half of the income received in neighboring Germany and Austria. Many earn about 700-800 euros. At the same time, good engineers, chemists, programmers, surgeons receive about 2000-3000 euros per month. Salary depends on the level of qualification, education and size of the company. However, it should be noted that the country has rather low prices for consumer goods and low taxes, after the payment of which the population has a sufficient amount to cover their needs.
Services sector
In the Czech Republic postindustrial economy, the leading sector is the service sector, in which a significant part of the able-bodied population is employed. The industry generates up to 60.8% of GDP. The largest number of people are employed in the financial sector, telecommunications companies, tourism and retail. Many global corporations work in the country, such as Tesco, Kaufland, Globus, BILLA, Ahold, which are the largest companies and largest employers. Supermarkets of these retail chains are found throughout the country.
The Czech Republic has created attractive working conditions for foreign IT companies. Good and transparent taxation conditions, the availability of qualified personnel, and the convenient geographical location of the country attract global IT giants. In the Czech Republic there are large offices of Microsoft, IBM, HP, Cisco, SAP. Amazon's online trading leader has a distribution center and large warehouses here. The key employer of the industry is Czech Post, which employs more than 30 thousand people who serve more than 3 thousand post offices.
Industry
The leading sector of the Czech economy is industry, which accounts for 36.9%. This is the highest rate in the European Union. The country has well-developed engineering, especially automobile production. The production of cars per capita ranks second in the region after Slovakia. As in part of Czechoslovakia, automotive technology has been developing here since the beginning of the 20th century.
In the new century, the Czech Republic has entered 20 countries, which produce more than a million cars a year. In recent decades, industry output exceeds 1.3 million (6th) place in Europe. The largest share is the production of cars. The industry leader is the famous Skoda Auto Corporation, which also manufactures electric trains.
The metallurgical industry (iron and steel production, metal processing) is concentrated in the areas of extraction of raw materials (black coal, calcite), mainly in the vicinity of the city of Ostrava. Iron ore is imported. The country has a developed chemical industry, pharmaceuticals and oil refining. The largest enterprises in the industry are Unipetrol (oil refining and petrochemicals), Semteks (chemical products).
