CZECH ECONOMY FACTS IN BRIEF 2016

2CZECH ECONOMY FACTS IN BRIEF

GENERAL INFORMATION

Czech Republic is a country with a population of 10.5 million people situated in the heart of Europe. It has been known for centu-ries as an industrial giant of this region – it was a driving engine of Austro-Hungarian empire, then of Czechoslovakia at the begi-nning of the 20th century, and then of the whole eastern bloc led by the Soviet Union. Although the centrally planned economy directed the country for more than 40 years, and hampered the Czech industry, culture and economic situation, after 26 years of market economy we can say that Czech Republic is back on its track to be an important player on the European continent.

Located at the crossroads of Europe, the Czech Republic is a nation of vast cultural and historical heritage as well as inspiring natu-ral beauty. Its economic performance has ensured its successful entry into the European Union and established it as an important economic player in the increasingly globalized world.

The Czech Republic is divided into 14 regions, including the capital city Prague. Prague is amongst the most developed regions in the EU, with a GDP per capita over twice the Czech average and an unemployment rate half that of the national rate. Prague has been one of the most economically developed region of the 10 nations which joined the EU in 2004.

Area: 78,867 km2

Population: 10,5 millionLabor force: 5,3 millionCapital: PragueLength of state border: 2,303 km

Border countries:• Germany (810 km)• Poland (762 km)• Austria (466 km)• Slovakia (265 km)

Selected distances from Prague:• Berlin 282 km• Paris 864 km• London 1,030 km• Copenhagen 634 km• Stockholm 1,054 km• Oslo 1,117 km• Helsinki 1,302 km

3CZECH ECONOMY

FACTS IN BRIEF

KEY INDICATORS REFERENCE

GDP growth rate 4.2%Infl ation 0.3%Interest rate 0.3%Trade balance (CZK million) 429,197FDI infl ow (USD million) 4,993Number of banks 46VAT 21%Unemployment rate 6.2% Share of households with internet connection 73.2%Share of renewable energy sources 13.2%Share of people with university education 17.6%Number of hospital beds 6,6/1000 peopleTourist visits 15,981,115Average monthly wage (CZK) 28,152Number of regions 14Population 10,537,818

Source: Czech National Bank , 2016 ; Czech Statistical Offi ce

The Czech Republic’s key advantages as an investment location include:• Central location in Europe• Strong presence of foreign investors• EU membership• Availability and quality of local suppliers• Existing platform for R&D• Compact and high-quality infrastructure• Skilled workforce• High share of secondary and tertiary education• Favorable labor costs and price stability• Transparent system of investment incentives• Mentality, culture and attitudes close to western countries• Enviable life style Source: CzechInvest, 2016

Time zone: GMT +1, summer time GMT +2Offi cial language: CzechOffi cial currency: Koruna (Kc) – Czech Crown (CZK) – 1 EURO = 27,020 CZK

4CZECH ECONOMY FACTS IN BRIEF

1990 – 2015 RAPID GROWTH WITH THE MARKET ECONOMY

2015 GDP 2015 GDP (PPP) GDP (nom.) GDP (PPP)

Euro million per capita per capita EU28 - 100%

Czech rep. 163 948 24 500 15 553 85 %Denmark 266 245 35 500 46 858 124 %Finland 207 220 31 000 37 819 108 %Norway 349 897 46 900 67 417 163 %Sweden 444 617 35 400 45 373 123 %Slovakia 78 071 22 000 14 398 77 %Poland 427 737 19 700 11 123 69 %Hungary 108 748 19 500 11 052 68 %

Source: EUROSTAT, 2016

After the fi nancial crisis impacts slowly faded away, Czech economy became one of the fastest growing in the whole EU. This was mainly caused by the intervention of the Czech central bank, which helped the exports of the country, and then of course it is due to the higher government spending. These measures helped the Czech economy in the short-term after the crisis, but in the long run these measures will have to be probably left out, because they could really harm the economy.

Real GDP growth 2009 ‐2017*

Source: OECD, 2016

‐10

‐8

‐6

‐4

‐2

0

2

4

6

8

Czech rep. Denmark Finland Norway Sweden

2009 2010 2011 2012 2013 2014 2015 2016* 2017*

5CZECH ECONOMY

FACTS IN BRIEF

FOREIGN DIRECT INVESTMENTS IN CZECH REPUBLIC

After 1989 Czech Republic became one of the fastest growing economies of Central Europe. This was mostly caused by the well--performed transformation from a centrally planned economy to a dynamic market-based economy. The successful transformati-on, and the entering of the country in western structures such as the EU or NATO helped to create a relatively quality institutional environment that attracted many foreign investors. In 2014 (the most recent data available) the FDI in Czech economy was only EUR 100,1 billion. As mentioned in the graphs below, the largest amount of investments came from Netherlands and more than the third of all FDI headed to the manufacturing industry.

Foreign direct investments 31. 12. 2014

Source: ČNB, 2016

Foreign direct investments  by fi eld 31. 12. 2014

Source: ČNB, 2016

24

13,2

12,63,83,94,76,1

12,1

19,6

Netherlands Austria Germany Slovakia Cyprus

Switzerland France Luxembourg Other

25,4

10,7

7,1

52,5

3,15,6

Manufacturing industry Finance & Insurance Warehouses & retail

Real estate ICT business Private property sales

Technical field Science  & Research Rest

33,47,1

6CZECH ECONOMY FACTS IN BRIEF

FALLING UNEMPLOYMENT,

BUT LASTING REGIONAL DIFFERENCES

According to the Czech Statistical Offi ce (ČSU) the medium monthly wage in Czech Republic grew by CZK 882 to CZK 23 726 in 2015; the average monthly wage in 2015 reached CZK 27 811. Four out of fi ve employees were earning gross wages between CZK 12,000 and CZK 42,000 a month. The highest wages in the long term are in the banking and insurance sectors, which are about twi-ce the average of other sectors, but employees in information and communication technologies are catching up very fast. Czech labor costs in 2015 represented roughly one third of those in Denmark, Sweden and Finland and one fourth of Norway’s.Unemployment rate in Czech Republic is currently the second lowest in the EU after Germany. As a matter of fact, Czech unemploy-ment in the past decade has been under the average of the whole EU. Although the aggregate looks really nice, if we look closer at the individual regions of Czech Republic we can fi nd large diff erences between them. Currently, the best situation with unemploy-ment is in the capital of Prague and the worst one is in the Moravian-Silesian region in the north of the country, which is famous for its coal mining and heavy industry – branches of economy that are slowly fading away. This will probably cause even more troubles with unemployment rate for Czech economy in the future.

1. Quarter of a year

2006 8,00%2007 6,00%2008 4,70%2009 5,80%2010 8,00%2011 7,20%2012 7,10%2013 7,40%2014 6,80%2015 6,00%2016 4,30%

Source: ČSÚ, 2016

8,15,9

5,25

4,74,7

4,24,2

3,73,6

3,43,33,3

2,3

0 1 2 3 4 5 6 7 8 9

MORAVA/SILESIAÚSTÍ NAD LABEM

LIBERECKARLOVY VARY

HRADEC KRÁLOVÉZLÍN

OLOMOUCPARDUBICE

SOUTH MORAVIAPILSEN

VYSOČINACENTRAL BOHEMIA

SOUTH BOHEMIAPRAGUE

Large regional diff erences

7CZECH ECONOMY

FACTS IN BRIEF

EXPORTS, EXPORTS, EXPORTS…

It is obvious that Czech Republic is a small open economy relying on its exports to foreign countries. In 2014 the value of goods and services sold abroad surpassed 80% of country’s GDP. The table below shows that most of the exports head to Czech’s closest Western neighbor – Germany. Germany is the Czech biggest business partner not only on the export side, but also on the import. This creates a heavy dependence of the Czech economy on its German neighbor, and might cause troubles if Germany enters in a recession of any kind. On the one hand, business with Nordic countries is quite smaller than the one with neighboring countries, thus none of them reached the top ten in exports or imports.On the other hand, the Nordic countries have come to play a far more signifi cant role in Czech economy than their combined po-pulation would indicate. As a Czech export market the Nordic countries overshadowed the USA in 2014. A number of the around 400 Nordic companies currently established in the Czech Republic are market leaders in their sector, such as the IT industry (Ti-eto); furniture (IKEA); paper industry (Stora Enso); construction (Skanska); pharmaceuticals (Novo Nordisk) and seafood (Marine Harvest). In addition to Czech-Nordic partnership within the EU and NATO, the cooperation also has a vital security dimension: Sweden’s Saab is supplying Czech Air Force with Gripen jet fi ghters and Norway’s Statoil safeguards Czech energy independence through natural Gas supply.

Source: Nordic News, 2016

EXPORTS 2015 ths. CZK

1. Germany 1 248 360 0692. Slovakia 348 038 6403. Poland 227 941 6684. United Kingdom 206 151 4445. France 198 749 88215. Sweden 59 524 87419. Denmark 37 653 73921. Finland 20 603 44425. Norway 17 091 55778. Iceland 1 275 952

Source: ČSÚ, 2016

IMPORT ORIGINS 2015 ths. CZK

1. Germany 901 434 0412. China 467 300 3353. Poland 275 619 9384. Slovakia 178 373 7065. Italy 140 910 78522. Sweden 29 273 30827. Denmark 20 623 48334. Finland 10 761 97538. Norway 8 452 73865. Iceland 2 155 215

Source: ČSÚ, 2016

8CZECH ECONOMY FACTS IN BRIEF

LARGEST NORDIC COMPANIES

Denmark: Bang & Olufsen, Cembrit CZ, Coloplast, Danfoss, DSV, Fibertex, ISS Facility, JYSK, LEGO Production, Marius Pedersen, Nilfi sk, Novo Nordisk, Orifarm, Radiometer, ROCKWOOL, VELUX

Finland: Caverion, Cramo, Dywidag Prefa, ENSTO Czech, Hansa, Huhtamaki, Huhtamäki ČR, KONE, LINDSTRÖM, LMC, Metso Minerals, Nokian Tyres, Orion Pharma, Ramirent, Ruukki CZ, ŠKODA TRANSPORTATION, Tieto Czech, Uponor Infra, YIT

Iceland: První Digitální, DCG, Creditinfo Solutions, Inkasso Servis

Norway: Cogen CZ, DNV, Elopak, Helly Hansen, Hydro Aluminium, Icas CS, Isola Powertekk, JOTUN CZECH, Kampa Group, Kverneland Czech, Orkla/HAME, Scandique, Scatec Solar, Tomra, Vitana, Vitana, WIKOV Gear, Yara

Sweden: ABB, Alfa Laval, ASSA ABLOY, Atlas Copco, Electrolux, ESAB, Euro-Center, Gambro, H&M, IKEA, LINDAB, LINDEX, Llentab, Loomis, Lundbeck, Mölnlycke, NIBE, Orifl ame, Pramet, Saab, Sandvik, Scania, SECO TOOLS, SECURITAS, Skanska, Stora Enso, Trelleborg, VOLVO

Nordic sales of Škoda auto a.s. (Number of sold cars)

Škoda cars 2010 2011 2012 2013 2014 2015

Denmark 6 850 6 944 9 041 13 704 13 322 13 449

Finland 9 183 10 217 8 686 8 371 9 645 9 870

Norway 6 755 7 620 6 793 6 948 7 451 7 490

Sweden 12 493 13 931 11 952 12 178 13 339 15 150

Total 35 281 38 712 36 472 41 201 43 757 45 959

Source: Statista, 2016

GRIPENS TRIGGERED EXPORT RELATIONS

From 2004 to 2014, Czech Republic gained CZK 31.6 billion thanks to the off set program that was concluded in connection with the leasing of 14 Swedish Gripen jet fi ghters in 2004. According to the 2004 Czech-Swedish contract, the industrial cooperation was to bring 130 percent of the value of the agreement for the lease of the Gripens, or CZK 25.545 billion. Direct investments in the Czech defense, aerospace and security sectors represent 20 percent of the contract; the remaining indirect off sets are industrial cooperation and exports opportunities for Czech companies. “The cooperation with our Swedish partners has been excellent from the very beginning,” Czech Defense Minister Martin Stropnicky comments.

Source: ČTK, 2016

9CZECH ECONOMY

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2421

17 16

64 65

44

36

48 46

37

29

51

5754

42

62

55

32

25

0

10

20

30

40

50

60

70

2012 2013 2014 2015

Estonia Czech Republic Slovakia Hungary Poland

Doing Business

BETTER CONDITIONS

TO START OUR OWN BUSINESS THAN EVER.

Doing business in central Europe was quite diffi cult in the 90s. The era of communism scarred this region with large bureaucracy and corruption, but since then, the central European countries came a long way towards freer business and entrepreneur envi-ronment. This was mostly caused by adopting new legislation, cultivation of the institutional environment of the countries and by destroying almost all remnants of the centrally planned economy. For someone it might be surprising that the Nordic countries, which are always praised by today’s social democrats for their welfare activities towards their citizens, are the ones with the freest business environment that empowers their economic growth. This might be a good lecture for the small countries such as Czech Republic – expand the freedom of entrepreneurs more than you are expanding the amount of your welfare state policies.

Source: World Bank, 2016

Ease of doing business overall ranking

2012 2013 2014 2015

24. Estonia 21. Estonia 17. Estonia 16. Estonia48. Slovakia 46. Slovakia 32. Poland 25. Poland51. Hungary 55. Poland 37. Slovakia 29. Slovakia62. Poland 57. Hungary 44. Czech Republic 36. Czech Republic64. Czech Republic 65. Czech Republic 54. Hungary 42. Hungary

Source: Doing business, 2016

Mobile phones everywhere % of population with Czech internet is speedy Mbit/s

Norway 96,1 1. South Korea 25,3Denmark 96,0 3. Japan 15,0Finland 94,0 5. Sweden 14,1Sweden 89,1 9. Czech Rep. 12,3Germany 86,7 11. Finland 11,7Slovakia 82,6 15. Norway 11,4Estonia 81,6 17. Denmark 11,2Czech Rep. 77,4 23. Hungary 8,8Hungary 74,3 25. Poland 8,6Poland 67,1 26. Slovakia 8,6

Source: ILS, 2016 Source: Akamai, 2016

10CZECH ECONOMY FACTS IN BRIEF

Women in politics

2015

Sweden 43,6Finland 41,5Norway 39,6Denmark 38,0Germany 36,5Austria 30,6Poland 24,1Czech rep. 20,0Slovakia 18,7Hungary 10,1

Source: http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=t2020_10&language=en

Employment rate by gender

2015 Female Male

Sweden 78,3 82,5Germany 73,6 82,3Denmark 72,6 80,2Finland 71,8 73,9Austria 70,2 78,4Czech rep. 66,4 83,0EU 28 64,3 75,9Hungary 62,1 75,8Poland 60,9 74,7Slovakia 60,3 75,0

EDUCATION & EQUAL OPPORTUNITIES

Female employment rate in the Nordic countries is, by far, the highest of all Europe. This is mainly caused by the cultural diff eren-ces in relations between men and women, which is historically more liberal in Nordic countries. Czech Republic is, in this matter, slightly above the EU 28 average, but of course, there is always some space for the improvement of the current situation. Czech Republic performs well in many measures of well-being in OECD‘s Better Life Index. The country ranks above the average in perso-nal security, education and skills, work-life balance and environmental quality, but below average in jobs and earnings, housing, health status, income and wealth, social connections, and civic engagement. Good education and skills are important requisites for fi nding a job. In Czech Republic, 92 percent of adults aged 25-64 have completed upper secondary education, well above the OECD average of 75 percent and the highest rate in the OECD. In terms of education quality, the average student scored 500 in reading literacy, math and science in the OECD’s Program for International Student Assessment. This score is slightly higher than the OECD average of 497. On average, Czech girls outperformed boys by 9 points

Source: Nordic News, 2016

INFRASTRUCTURES

Czech Republic has a long tradition in the transport industry. Firms based in the country create vehicles from cars and locomotives to trolleybuses and trams. These products are famous not only in their home country, but also abroad. The company has been active in the Nordic countries for a number of several years; it is currently participating in several public transportation tenders in the region. In 2004-2006, the Czech engineering company’s subsidiary ŠKODA Vagonka delivered 16 suburban train units to the Finnish Railways. The trains are specially designed to withstand Scandinavia’s tough climate conditions. Landskrona in Sweden is operating trolley buses produced by another subsidiary, ŠKODA Electric.

11CZECH ECONOMY

FACTS IN BRIEF

IT IS GOOD TO BE CZECH…

Czech Republic is, and has always been, famous for its beautiful nature, some magical cities and many sights to visit. Czech Repub-lic is safe even in today’s complicated security situation, its population is getting richer and richer, healthcare is on the level of the Nordic countries and beer is still cheap. Prague usually ranks among the world’s most beautiful cities and everywhere there are always things to do – from theaters, sports games and good restaurants, to concerts, sightseeing or just hanging out in the cities or the countryside. However bad might be the mood of Czech people about their current situation, they have never lived through such a long period of peace and prosperity, and hopefully it will last as long as possible.

Purchasing

power indexSafety index

Healthcare

index

Consumer price

index

Property price

to wage ratioPollution index

Overall - quality

of life index

5. Denmark 7. Austria 6. Austria 2. Norway 6. Denmark 1. Finland 1. Denmark9. Finland 9. Denmark 8. Denmark 5. Denmark 14. Norway 2. Sweden 6. Austria12. Sweden 13. Finland 13. Finland 10. Sweden 17. Finland 4. Norway 9. Finland14. Norway 17. Slovakia 14. Sweden 15. Finland 26. Slovakia 8. Austria 12. Sweden23. Austria 18. Czech Rep. 15. Czech Rep. 19. Austria 28. Austria 9. Denmark 14. Norway31. Czech Rep. 22. Poland 19. Norway 38. Slovakia 29. Czech Rep. 23. Czech Rep. 20. Czech Rep.32. Poland 28. Norway 43. Slovakia 40. Hungary 32. Hungary 24. Slovakia 28. Slovakia37. Slovakia 33. Hungary 46. Poland 43. Czech Rep. 34. Poland 25. Hungary 30. Poland48. Hungary 44. Sweden 56. Hungary 46. Poland 41. Sweden 30. Poland 37. Hungary

Source: Numbeo, 2016 / https://www.numbeo.com/quality-of-life/rankings_by_country.jsp?title=2016-mid&region=150

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