Investment and Business Development Agency

menu

News

Czech Republic experiences record economic growth

The Czech economy is successful, growing by 6 per cent last year, a record figure in its history. Extraordinarily good foreign trade results and foreign investment are the main factors. Export performance of the economy is especially outstanding. With more cars, machinery and other Czech-made products selling abroad, export trade grew twice as fast as imports last year. Statisticians also say the economic figures signal a gradual acceleration of the growth. Czech GDP expansion started with 5.3 per cent in the first quarter of 2005 ending with a record 6.9 per cent for the last three months of the year.

22.03.2006

Czech results underscored the sharp contrast in economic growth between the new European Union member and the rest of the EU, where the Eurostat statistical agency said GDP for all 25 member countries rose just1.6per cent last year.HungarianGDP grew by4.1 percent, thePolish economy grew by 3.2percent, only theSlovak GDP growth was comparable to the Czechin 2005. However, the Czech Republic’s economy grew from a higher base than that of neighbouring countries – the CR’s per capita GDP according to purchasing power parity is the second highest (behind Slovenia) of the new EU member states. This means that theachieved result of economic growth is more significant. "Even though our growth rate is the same as Slovakia’s, in absolute terms it is a quarter higher in the Czech Republic,” says Jiri Havel, Deputy Prime Minister for the Economy.What is even more important,there are healthy and sustainable fundamentals behind the Czech growth, which is accompanied by a healthy development of public budgets and a high degree of social cohesion.

”The launch of the Toyota Peugeot Citroën Automobile (TPCA) car plant, which kickstarted production at its suppliers, had a decisive impact on last years economic growth,” says CzechInvest CEO Tomas Hruda, and adds: “However, other foreign investment projects from last and previous years are major contributors to export growth as well and for us it is a clear proof that doing business in the Czech Republic pays back both to investors and to the country.”

The year 2005 was extraordinary not only from the perspective of the Czech GDP growth, but also concerning the number of new investment projects, as monitored by the CzechInvest agency, or from the perspective of the total inflow of foreign investment (FDI), as monitored by the Czech National Bank. “CzechInvest mediated a total of 154 new foreign and domestic investment projects worth over 3.2 billion dollars last year.This means eight projects and nearly 890 million dollars more than in the previous year,” says Rene Samek, director of CzechInvest’s Investment and Applied Research Division.

As for thetotal FDI inflow, the country received almost11billion dollars (CZK more than 263 bln) in 2005, which is thehighest figure in history in dollar terms and second highest figure in history in koruna terms.


MORE ABOUT THE CZECH REPUBLIC

The Czech Republic – a member of the EU, OECD, NATO, WTO, IMF and EBRD – is an open market economy, parliamentary democracy and one of the economically most successful post-transition countries. The stable economic environment, skilled labour force, central location within the European single market and high-quality infrastructure make the country a very attractive location for doing business. The total inflow of foreign direct investment (FDI) to the Czech Republic from 1993 to the present has reached roughly USD 54 billion, and in terms of inflow of FDI per capita, the CR has been among the most successful Central European countries over the past six years.

The Czech Republic is anticipating one the highest rating assessments in Central and Eastern Europe. The country received an A1 grade from Moody’s and an A- grade from Standard and Poor’s. Last year, the international rating agency Fitch upgraded all of its ratings of credit reliability for the Czech Republic. It gave the Czech Republic an A for its long-term foreign currency obligations compared to the previous A-. The rating of long-term debts in Czech crowns was raised from A to A+. The short-term currency rating jumped from F2 to F1 and the rating ceiling reached AA- from A+. The outlook for all of these ratings in now stable.

The Czech Republic is a member of the Multilateral Investment Guarantee Agency (MIGA) under the World Bank-IMF group and also a signatory of a range of bilateral international agreements on the support and protection of foreign investments, which place on participating countries the obligation to treat the investments of non-residents in the same manner as those of residents and to guarantee them full legal protection and security. The Czech Republic has such agreements with, for example, the United States, Germany, Great Britain, France, Switzerland, Luxembourg, the Netherlands, Finland, Norway and Denmark.