Czech Republic

As Czechoslovakia, the country was worried about meeting the interests of the various minority groups. The invasion of the Warsaw Pact troops in 1968 ended any attempts to liberalize the Communist rule that had come to influence the country. After the downfall of the USSR, and a “Velvet Revolution,” the country became free once again. The country experienced the “velvet divorce” on January 1, 1993, when Czechoslovakia was split into the Czech Republic and Slovakia. The Czech Republic became a member of NATO in 1999 and of the EU in 2004. The June 2006 elections led to a stalemate so the President selected a new government, with Mirek TOPOLANEK as Prime Minister, in order to end it.

Main Airports

Prague (PRG) (Ruzyne)

U.S. Embassy

Trziste 15, 11801 Prague 1, Czech Republic
tel: 420-257-022-000

Statistics

GDP: purchasing power parity:

$199.4 billion (2005 est.)

GDP - real growth rate:

6% (2005 est.)

GDP - per capita: purchasing power parity:

19,500 (2005 est.)

Inflation rate (consumer prices):

1.9% (2005 est.)

Labor force:

5.27 million (2005 est.)

Exports:

$78.37 billion f.o.b. (2005 est.)

Exports - partners:

Germany 33.5%, Slovakia 8.7%, Austria 5.5%, Poland 5.5%, France 5.3%, UK 4.6%, Italy 4.3% (2005)

Imports:

$76.59 billion f.o.b. (2005 est.)

Imports - partners:

Germany 30%, Russia 5.7%, Slovakia 5.4%, China 5.1%, Poland 5%, Italy 4.8%, France 4.5%, Netherlands 4% (2005)

Population:

10,235,455 (July 2006 est.)

Population growth rate:

-0.06% (2006 est.)

Population Below Poverty Line:

NA

Major Industries:

metallurgy, machinery and equipment, motor vehicles, glass, armaments

Employing Workers: 45*

Registering Property: 58*

Enforcing Contracts: 57*

Closing a Business: 113*

*2006 World Bank rank out of 175 countries

Starting a Business

The table below shows the number of steps and the amount of time needed to start a business, on average

Indicator	Czech Rep.	Region
Procedures (number)	10	9.4
Time (days)	24	32

Czech Rep. Risk Assessment

Country Rating

Rating: A2

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.  

Risk Assessment

Economic growth remained relatively strong in 2007. Consumption benefited from increases in real wages and social benefits and the easing of unemployment, partly compensating for a slight investment slowdown. Export-oriented sectors (the automotive industry, electric and electronic equipment and machinery) continued to be the most dynamic. Conversely, food and textiles are still mired in difficulty. The Coface payment-incident index is back in line with the world average. Growth should slow from 2008 with private consumption undermined by a slower expansion of credit and tighter fiscal policy. Investment should be stronger however thanks to increases in European funding and a steady influx of foreign investment, notably in the automotive industry. The current account deficit, sustained especially by investment-income payments abroad, should ease amid a continuing trade surplus. Foreign direct investment should moreover continue to cover a significant proportion of the country's external financing needs.

Increases in indirect taxes and regulated prices should however stoke inflation in 2008. The public sector finance situation is furthermore still shaky. The fiscal deficit widened again in 2007 as a result of a sharp increase in social spending. The government's stabilisation programme should result in a reduction in that imbalance from 2008. It appears uncertain however whether the government will be capable of durably reducing public spending in the absence of major reforms in the areas of health and pensions. In this context, adoption of the euro seems likely to be postponed beyond 2012.

The June 2006 elections resulted in a parliament with no majority with the political gridlock not untangled until January 2007 when centre-right coalition won a vote of confidence thanks to the abstention of two former social democratic deputies. This precarious situation compounded by discord within the coalition will not facilitate implementation of a fiscal overhaul.

STRENGTHS

• Admission to the European Union has enhanced economic stability.
• The country continues to be a prized destination for foreign investors.
• The macroeconomic imbalances are still manageable.
• Foreign and public sector debt remain limited.

• The economy continues to be highly dependant on foreign trade — particularly on economic trends in the Europe of the Fifteen.
• Deterioration of public sector accounts has delayed the country's integration into the euro zone.
• Repatriation of investment income has undermined the current account.
• The coalition government's weakness does not augur well for far-reaching public finance reform.

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