PESTLE Czech Republic

Czech Republic
In-depth PESTLE insights
Country Profile Series
Report Code: ML00002-009

Published: June 2019
1. Overview
1.1. Catalyst
This profile analyzes the political, economic, social, technological, legal and environmental (PESTLE) structure in the
Czech Republic. Each of the PESTLE factors is explored on four parameters: current strengths, current challenges,
future prospects and future risks.
1.2. Summary
1.2.1. Key findings
The Czech Republic guarantees freedom of the press through its Charter of Fundamental Rights
and Freedoms, but increasing protests towards the incumbent prime minister brings in possible
political uncertainties
The Czech Republic guarantees freedom of the press through its Charter of Fundamental Rights and Freedoms. There
are very few formal restrictions on the free expression of opinion, with both public and private media being able to
express subjective views without the influence of the government or partisan pressure. The Czech constitution also
provides far reaching access to government information, which has consistently improved due to the increase in the
quantity and quality of electronic portals for public administration. However, in recent times, there have been
concerns over the openly hostile attitude of the incumbent President Zeman towards the journalists and media.
Still, on account of the nation’s comparatively liberal attitude towards the press, Reporters Without Borders has
ranked the Czech Republic 40th amongst 180 countries in its 2019 ‘World Press Freedom Index Rankings’. Liberal
media laws have also been bolstered by a favorable Constitutional Court and other institutional rulings in the past.
Incumbent Prime Minister Andrej Babis, who owns Agrofert conglomerate, is alleged to have benefited from EU
subsidies illegally; the Czech Police initiated criminal proceedings against Babis in 2017. Based on the reports from
the European Anti-Fraud Office (OLAF) and subsequent investigations, the Czech Police recommended indicting
Babis on charges of fraud in April 2019. Protests against Babis have since intensified. The leaked disclosure of a
European Commission (EC) auditors’ preliminary report indicates that Babis violated the conflicts of interest rules
and for the same reason the country may have to return the subsidies illegally gained by Agrofert. On June 4, 2019,
120,000 people gathered in Prague in a protest rally, which is considered to be one of the largest Czech protests
since the Velvet Revolution in 1989. Babis continues to refute the allegations and the demand for his resignation and
for him to face trial have also been rejected as of the first weeks of June. The protests are expected to intensify as
the protesters called for a larger demonstration on June 23, 2019. Any use of intense force by the administration to
pacify the protesters could cause the country to fall into deeper political chaos and uncertainty, which could have an
impact on the democracy the nation has enjoyed since 1993.
The Czech Republic has a world-class automotive industry, but the country’s export dependence
on the EU is a concern
The automotive industry is one of the pillars of the Czech economy, with the country being a key automotive
manufacturing center for companies, such as Skoda, Hyundai, Toyota Peugeot, and Citroen (the latter three have a
jointly run plant). According to CzechInvest, around 800 companies are active in the country’s automotive industry,
offering more than 160,000 direct jobs. Around 26% of the nation’s manufacturing output, as well as 24% of the
PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

© MarketLine. This report is a licensed product and is not to be photocopied Page 2
Czech Republic’s total exports, come from the automotive industry as of 2018. The nation produced 1.44 million cars
in 2018, while the automotive industry alone contributed 9% of the nation’s GDP in 2018.
The openness of the Czech economy and its strong integration into EU manufacturing supply chains, predominantly
in the automotive sector, exposes it to external shocks. Around 80% of the country’s exported goods were directed
to the EU; exports to Germany alone constituted 32.2% of total exports by value in 2018, according to the
International Trade Centre. In contrast, exports to emerging markets, including Brazil, China, Russia, India, Indonesia
and Turkey, together accounted for a mere 5% of the Czech Republic’s total exports in 2018 . The sluggish demand
from EU economies is expected to impact the manufacturing industry and the country’s GDP growth in a
considerable manner in 2019. Considering that the country is highly dependent on exports for its economic growth,
it needs to diversify into emerging markets to better handle contingencies.
The Czech Republic's strong healthcare sector supports citizens, but the nation’s increasing
conflicts with various EU policies, including EU migration policies, could impact the cohesion
between the EU and the Czech Republic in the long run
Healthcare services in the Czech Republic are well developed, and the country is considered to have extensive reach
and coverage in terms of services compared to neighboring nations such as Slovakia. According to the ‘Euro Health
Consumer Index 2018’, published by the Health Consumer Powerhouse, the Czech Republic was ranked 14th out of
the 35 nations in Europe in terms of the quality of its healthcare system. In comparison, Slovakia was ranked 17th,
Italy 20th, Greece 29th and the UK was ranked 16th.
The country’s political parties are opposed to the European Commission’s proposal on binding quotas to distribute
migrants among the EU member states. In July 2015, the government agreed to allow the migration of 1,500
refugees into the country by 2017. Politicians across the whole political spectrum (which includes both the right and
left) have opposed the relocation of migrants, especially in the Schengen area. The issue has sparked differences
within the three-party coalition and also between the president and the government. The country’s political parties
are reflecting the general view of the people, who oppose the acceptance of refugees from Syria and North Africa. In
March 2018, Prime Minister Andrej Babis said that the Czech government will not accept any quota imposed by the
European Union. In October 2018, Babis reaffirmed his policy stance regarding the need for illegal migrants to be
sent to their respective home nations and the need to help the migrants at their home states to reduce migrant
inflows. The prime minister also indicated that the country will defend itself against any legal action imposed on
them by the EU regarding the nation’s migration related policies.
Despite increasing investments in research and development (R&D), the country lags
considerably in terms of reaping its benefits, for instance, in the form of high technology exports
According to the OECD, the Czech Republic’s gross domestic expenditure on research and development (GERD)
intensity improved from 1.56% in 2011 to 1.79 % in 2017. It is also catching up with the EU28 average (1.96% of
GDP). According to the ‘Global Competitiveness Report 2018’, published by the World Economic Forum, the Czech
Republic ranked 20th out of 140 nations in terms of R&D expenditure as a percentage of GDP. In terms of the quality
of research institutions index, the country was ranked 25th out of 140 nations. Under the GESHER/MOST program,
the Czech Republic and Israel are providing grants to Czech companies to undertake R&D projects covering ICT,
sustainable technologies, agriculture and food processing technology, biotechnology, medical technology and
engineering (especially new materials, nanotechnology, cybernetics and robotics). The government also provides tax
breaks for R&D co-operation between universities, public scientific research institutions and companies.
Technology exports as a percentage of manufactured exports in the Czech Republic were below the global average in
2017, according to the World Bank. This indicates that amidst the increasing R&D expenditure, the country failed to
channel this into high-technology exports (as a percentage of manufactured exports). This shows the weakness in
the nation’s technological landscape in terms of the level of innovation and technological advancement. In 2017,
Czech high-technology exports as a percentage of manufactured exports stood at 12.77%, while the world average
for the same was 16.1%.

Although conditions for doing business are relatively good, starting a business remains tough
The Czech Republic is ranked as the 23rd freest economy in the world by the ‘2019 Index of Economic Freedom’,
published by the Heritage Foundation and the Wall Street Journal, with a score of 73.7 out of 100. It was placed 13th
out of 44 countries from the European region. Furthermore, the country’s overall score was much higher than the
regional average of 68.6. The country’s high levels of property rights, low tax burdens, robust fiscal health, and high
level of freedom related to its monetary, trade, investment and financial landscapes are considered its strengths.
Labor regulations are relatively flexible and labor management relations are generally cordial.
Meanwhile, in the World Bank’s Doing Business 2019 report, the country was ranked 35th globally out of 190
nations. However, in terms of starting a business, procedures in the Czech Republic are considered cumbersome,
leading to the country being ranked 115th out of 190 countries. It takes eight procedures and 24.5 days in the Czech
Republic to start a business, while the average for OECD high income nations stood at 4.9 procedures and 9.3 days.
These statistics indicate that there is further scope to ease the country’s procedural burden. The country has to
simplify and reduce its procedures and improve the regulatory framework in order to do this.
The Czech Republic has high environment tax to GDP, but the country performs poorly in terms
of eco-innovation outputs and resource efficiency outcomes
The country’s total environment tax to GDP ratio was 2.15% in 2016, much higher than that of the OECD average of
1.63%. Environmental taxes are taxes levied to control problems such as the deterioration of the environment;
higher taxation in this sphere indicates the government’s approach to controlling problems relating to the
environment. As per the OECD, environmental taxes are an important parameter in measuring a government’s
efforts to control emissions. For instance, a higher tax wedge on energy products might encourage consumers to
explore other sources of energy, which can push the consumption of cleaner energy, while a lower tax wedge will
lead to overconsumption and may lead to pollution.
According to the ‘Eco-Innovation Index 2017’, published by the European Commission, the country lags considerably
behind the EU28 average and was ranked fourth from last in terms of its resource efficiency outcomes. The country
received an index score of 44 for its resource efficiency outcomes. In contrast, its neighboring nations Austria,
Germany and Slovakia scored 128, 121 and 87, while Luxembourg achieved the highest score of 183 in 2017. The
country also lags behind the EU28 index value of 100 in terms of eco-innovation outputs, with a score of 49 in 2017.
These low index scores indicate that the Czech Republic needs to have more targeted and effective environmental
policies to improve its resource efficiency use, as well as its impact and reach in terms of society.
1.2.2. PESTLE highlights
Political landscape
 The country scored in the 76.85 percentile on the voice and accountability parameter in the World Bank’s
Worldwide Governance Indicators 2018. This parameter reflects perceptions of the extent to which a
country's citizens are able to participate in selecting their government, as well as freedom of expression,
freedom of association and a free media. In comparison, its neighboring nation Slovakia had a score of
75.86.
 According to the ‘Corruption Perceptions Index 2018’, published by Transparency International, the country
was 38th out of 180 countries, with a score of 59 out of 100. Over the past six years, the country has
witnessed a considerable improvement in its Corruption Perceptions Index scores. In 2013, it stood at 48,
indicating a more corrupt nation.

Economic landscape
 The nation’s current account surplus stood at 1.1% of GDP in 2017, declining sharply to 0.2% of GDP in
2018. It is expected to post a deficit of 0.6% of GDP in 2019, according to the International Monetary Fund
(IMF). According to MarketLine, it is expected that exports as a percentage of GDP will reduce to 90.5% in
2019, from 93.6% in 2018. An economic slowdown amongst the Czech Republic’s major trading partners in
the EU, especially in Germany, will have a major impact on the country’s export scenarios.
 As per the World Bank's logistics performance index (LPI), transport and logistics infrastructure in the Czech
Republic improved over the last two years with an upward jump in rank to 22nd in 2018, from 26th out of
160 countries in 2016.
Social landscape
 For 2018, the government raised the country’s minimum monthly wage from CZK11,000 (US$470.56) to
CZK12,200 (US$561.44), which came effective from January 1, 2018. From January 1, 2019, the monthly
wage was further revised to CZK13,350 (US$593.51). In the 2019 budget, the government also proposed an
increase in pensions, along with public sector salaries. It also introduced a free inter-city public transport
travel scheme for pensioners and students.
 According to the UN, the percentage of population aged 60 or over in the Czech Republic is expected to
reach 37.0% by 2050, from 24.9% in 2015. According to the OECD, the old-age dependency ratio (over-65
population as a share of working-age (15 to 64) population) for the Czech Republic will rise sharply from
28.75% in 2015 to 58.9% by 2050, a rise of 30.1 percentage points. This will affect the economy, as the
working age population‘s contribution to support the non-working population will decrease in the future.
Technological landscape
 The Czech Republic provides substantial subsidies for R&D expenditure. The B index measures the before-
tax income needed by a firm to break even on US$1 of R&D outlay. The 1 minus the B index shows the
government’s generosity in terms of giving R&D incentives, especially for small and medium enterprises.
According to the OECD, R&D subsidies in the Czech Republic are among the highest in terms of OECD
countries.
 The Czech Republic has one of the most well-developed telecom markets in Europe. The penetration rate
for mobile subscriptions stood at 137.04 per 100 people in 2018. The country had 14.53 million mobile
subscriptions at the end of 2018, which is expected to rise to 14.66 million subscribers by 2023. The number
of internet users in the country also grew at a rapid pace. In 2011, only 65.45% of the population had access
to the internet; this figure increased to 80.38% by 2018. The number of internet users at the end of 2018
totaled 8.52 million.
Legal landscape
 As a member of the EU, the Czech Republic provides a reasonably hospitable climate for foreign
investments. According to the UN Conference on Trade and Development, total foreign direct investment
(FDI) stock increased to US$155.02bn in 2018, from $121.85bn in 2016. According to the OECD, FDI
restrictions in the Czech Republic are some of the lowest in the OECD region and the restrictions are way
below than that of neighboring nations such as Germany, Slovakia, Poland and Austria.

 According to the ‘Global Competitiveness Report 2018’, the Czech Republic ranked 47th out of 140 nations
in terms of product market competitiveness and was ranked below many of the major economies in the
European region. This is indicative of a less competition-friendly market and monopolies in various sectors.
Environmental landscape
 According to Eurostat, for the Czech Republic, the share of energy from renewable sources in terms of its
gross final energy consumption stood at 14.8%, below the EU28 average of 17.5%, for 2017. However, it is
above the Europe 2020 target of 13% for the nation.
 According to the ‘Environmental Performance Index’ published by Yale University, the Czech Republic
performed poorly in terms of air quality with a score of 65.77 out of 100 in 2018, ranking 97th amongst 180
nations. In 2016, the country was ranked 75th with a score of 70.26 out of 100. In terms of PM2.5 exposure,
the country was ranked 154th out of 180 nations in 2018, with a deteriorating performance in rank from
148th in 2016.

1.2.3. Key fundamentals
Table 1: Czech Republic – Key Fundamentals, 2016–2023f
2016 2017 2018e 2019f 2020f 2021f 2022f 2023f
GDP, constant 2010 prices (US$ 231.02 241.07 248.05 255.24 262.01 268.50 275.13 281.99
bn)
GDP growth rate (%) 2.45 4.35 2.89 2.90 2.65 2.48 2.47 2.50
GDP, constant 2010 prices, per 21,865.81 22,765.31 23,332.90 23,937.85 24,533.47 25,116.30 25,711.79 26,335.17
capita (US$)
Inflation (%) 0.68 2.45 2.19 2.36 2.03 1.94 1.84 1.79
Exports, total as a percentage of 86.57 85.69 93.62 90.49 91.41 91.73 92.17 92.12
GDP
Imports, total as a percentage of 75.42 75.84 83.97 81.41 82.10 82.37 82.83 82.94
GDP
Mid-year population (million) 10.57 10.59 10.63 10.66 10.68 10.69 10.70 10.71
Unemployment rate (%) 3.95 2.90 3.19 3.32 3.53 3.63 3.63 3.67
Mobile penetration (per 100 135.00 136.53 137.04 137.27 137.38 137.42 137.44 137.45
people)
Source: Country Statistics, MarketLine

MARKETLINE

Table of Contents
1. OVERVIEW 2
1.1. Catalyst 2
1.2. Summary 2
1.2.1. Key findings 2
1.2.2. PESTLE highlights 4
1.2.3. Key fundamentals 7
2. KEY FACTS AND GEOGRAPHIC LOCATION 16
2.1. Key facts 16
2.2. Geographical location 17
3. PESTLE ANALYSIS 18
3.1. Summary 18
3.2. Political analysis 19

3.2.1. Overview 19
3.2.2. Current strengths 19
3.2.3. Current challenges 20

3.2.4. Future prospects 20
3.2.5. Future risks 22
3.3. Economic analysis 23

3.3.1. Overview 23
3.4. Social analysis 28

3.4.1. Overview 28


3.5. Technology analysis 31

3.5.1. Overview 31
3.5.3. Current Challenges 32

3.6. Legal analysis 37

3.6.1. Overview 37
3.7. Environmental analysis 40

3.7.1. Overview 40

4. POLITICAL LANDSCAPE 44
4.1. Summary 44
4.2. Evolution 44
4.2.1. Pre-2000 44
4.2.2. 2001–2010 45
4.2.3. 2010 onwards 45
4.3. Structure and policies 48

4.3.1. Key political figures 48
4.3.2. Structure of government 48
4.3.3. Center/federal 48
4.3.4. Key political parties 49

4.3.5. Composition of government 51
4.3.6. Key policies 51
4.4. Performance 52
4.4.1. Governance indicators 52
4.5. Outlook 53
5. ECONOMIC LANDSCAPE 54
5.1. Summary 54
5.2. Evolution 54
5.2.1. 1945–1990 54
5.2.2. 1991 onwards 55

5.3.1. Financial authorities and regulators 56
5.3.2. Stock exchange 57
5.4. Performance 57
5.4.1. GDP and growth rate 57
5.4.2. GDP composition by sector 59
5.4.3. Fiscal position 62

5.4.4. Exports and imports 63
5.4.5. Current account position 63
5.4.6. External debt 64
5.4.7. International investment position 64
5.4.8. Monetary situation 64
5.4.9. Employment 66
5.5. Outlook 66
6. SOCIAL LANDSCAPE 67
6.1. Summary 67
6.2. Evolution 67

6.3.1. Religious composition 68

6.3.2. Education 68
6.3.3. Healthcare 69
6.4. Performance 70
6.4.1. Healthcare 70
6.4.2. Income distribution 70

6.4.3. Education 71
6.5. Outlook 71
7. TECHNOLOGICAL LANDSCAPE 72
7.1. Summary 72
7.2. Evolution 72

7.3.1. R&D 73
7.3.2. Intellectual property 73
7.4. Performance 73
7.4.1. Telecommunications and Internet 73
7.4.2. Intellectual property 74
7.5. Outlook 75
8. LEGAL LANDSCAPE 76
8.1. Summary 76
8.2. Evolution 76

8.3.1. Structure of the judicial system 76
8.3.2. Taxation 76
8.4. Performance 77
8.4.1. Effectiveness of the legal system 77
8.5. Outlook 77
9. ENVIRONMENTAL LANDSCAPE 78
9.1. Summary 78

9.2. Evolution 78
9.4. Performance 79
9.4.1. Environmental impact 79
9.5. Outlook 80
10. APPENDIX 81
10.1. ISO codes of selected countries 81
10.2. Ask the analyst 82
10.3. Disclaimer 82

List of figures
Figure 1: Map of the Czech Republic 17
Figure 2: Corruption Perceptions Index Score for the Czech Republic, 2013–2018 21
Figure 3: Corruption Perceptions Index Scores, 2018 22

Figure 4: Current Account Balance as a Percentage of GDP, 2014–2023f 24
Figure 5: Labor Force as a Percentage of the Total Population, 2009–2023f 25
Figure 6: Share of Population by Tertiary Education Attainment (%), 2017 26

Figure 7: Return on Equity Amongst EU Banks by Country (%), 2017 27
Figure 8: Old-Age Dependency Ratio, 2015, 2025 and 2050 30
Figure 9: Gross Domestic Expenditure on Research and Development (GERD) as a Percentage

of GDP, 2017 32
Figure 10: High-technology Exports as a Percentage of Manufactured Exports, 2007–2017 33
Figure 11: Number of Patents Granted by the USPTO, 2018 34
Figure 12: Tax Subsidy Rates on R&D Expenditures, 2017 35
Figure 13: Share of Government R&D Expenditure in Total R&D Expenditure, 2008–2017 36
Figure 14: FDI Regulatory Restrictiveness Index, 2018 38
Figure 15: Product Market Competitiveness, 2018 39
Figure 16: Environmental Taxation as a Percentage of GDP, 2016 41

Figure 17: The Eco-Innovation Index, 2017 42
Figure 18: Energy Consumption from Renewable Sources as a Percentage of Gross Final
Energy Consumption, 2017 43
Figure 19: The Czech Republic – Key Political Events 47
Figure 20: The Czech Republic – Key Political Figures 48
Figure 21: Composition of Chamber of Deputies, October 2017 51
Figure 22: Historical GDP Growth of the Czech Republic, 2007–2018 56
Figure 23: Nominal GDP and Real GDP Growth Rate in the Czech Republic (US$ Billion/%),
2013–2023f 58
Figure 24: GDP Composition by Sector, 2018 59
Figure 25: Agricultural Output of the Czech Republic (CZK Billion/%), 2013–2018 60
Figure 26: Industrial Output of Czech Republic (CZK Trillion/%), 2013–2018 61
Figure 27: Services Output of Czech Republic (CZK Trillion/%), 2013–2018 62
Figure 28: External Trade of Czech Republic, 2014-2018 63

Figure 29: CPI and CPI-based Inflation in the Czech Republic, 2013–2023f 65
Figure 30: Unemployment in the Czech Republic (Millions/%), 2013–2023f 66
Figure 31: Expenditure on Healthcare, 2008–2017 70
Figure 32: Public Expenditure on Education, 2007–2016 71

Figure 33: Internet Users and Penetration, 2013–2018e 74
Figure 34: Carbon Dioxide Emissions (Million Tons/%), 2010–2017 79

List of Tables
Table 1: Czech Republic – Key Fundamentals, 2016–2023f 7
Table 2: The Czech Republic – Key Facts, 2019 16
Table 3: Analysis of the Czech Republic's Political Landscape 19

Table 4: Analysis of the Czech Republic's Economic Landscape 23
Table 5: Analysis of the Czech Republic's Social Landscape 28
Table 6: Analysis of the Czech Republic's Technology Landscape 31

Table 7: Analysis of the Czech Republic's Legal Landscape 37
Table 8: Analysis of the Czech Republic's Environmental Landscape 40
Table 9: Mid-Year Population by Age (as a Percentage of the Total Population), 2018e 68
Table 10: Patents Granted by the USPTO, 2013–2018 75

Key Facts and Geographic Location
2. Key Facts and Geographic Location
2.1. Key facts
Table 2: The Czech Republic – Key Facts, 2019

Country and capital
Full name The Czech Republic
Capital city Prague
Government
Government type Parliamentary republic
Head of state President Milos Zeman
Head of government Prime Minister Andrej Babis
Population (2018) 10.63 million
Currency Czech koruna (CZK)
GDP per capita, adjusted by PPP US$37,289.67

(2018)
Internet domain .cz
Demographic details
Life expectancy (2018 est.) 78.9 years (total population)
76.0 years (men)
82.1 years (women)
Ethnic composition (2011 Czech (64.3%), Moravian (5.0%), Slovak (1.4%), Other (1.8%), Unspecified (27.5%)
census)
Major religions (2011 census) Roman Catholic (10.4%), Protestant (1.1%), Other and unspecified (54.0%), None
(34.5%)
Country area 78,867 sq. km
Languages (2011 census) Czech (official) (95.4%), Slovak (1.6%), Other (3.0%)
Exports Machinery and transport equipment, raw materials, fuel, chemicals.
Imports Machinery and transport equipment, raw materials and fuels, chemicals.
Source: The CIA World Factbook MARKETLINE

Key Facts and Geographic Location
2.2. Geographical location

The Czech Republic is a landlocked country located in Central Europe, surrounded by Germany, Poland, Slovakia and
Austria.
Figure 1: Map of the Czech Republic
Source: The CIA World Factbook ©MARKETLINE

PESTLE Analysis
3. PESTLE Analysis
3.1. Summary
The Czech Republic has made a successful transition to democracy since its creation in 1993 and has been credited
with fostering democratic values. The country’s liberal media laws further endorse its democratic principles.
However, the country’s political scene is often characterized by high levels of corruption. In the October 2017
legislative elections, ANO 2011 emerged as the winner securing 29.6% of the votes and 78 out of 200 seats in the
Chamber of Deputies. Andrej Babis became the prime minister. Due to fraud charges against Babis, other
mainstream parties have decided not to form a coalition government with ANO 2011. There were increasing protests
against Babis during May and June 2019, demanding his resignation over the European Union (EU)’s audit report
draft, implicating Babis over allegations of breaching EU conflict of interest rules. With Babis refuting the allegations
and refusing to resign, the country’s political landscape is expected to remain intense in the second half of 2019.
The Czech economy has well-developed infrastructure and an excellent automotive industry. The country’s banking
sector continues to show resilience, with high liquidity buffers and the efficient management of its non-performing
loans (NLPs). However, under the current administration, the positive fiscal balances are expected to turn negative
from 2019 as the government has plans for generous spending policies, including high rail subsidies and wage
increases. A lack of diversification in the export base is a cause for concern, with more than 80% of exports
concentrated in the EU block itself. This could result in vulnerability to external shocks — especially as the country’s
economic growth depends significantly on exports.
The Czech Republic has had a system of compulsory insurance in place since 1992, along with fee-for-service care.
The healthcare system in the Czech Republic is quite decentralized and considered one of the best in Europe. The
incumbent government under Babis is also introducing reforms related to the minimum wage and pension systems.
According to the European Commission, the country will see a surge in its aging population in the first half of this
century, which will create immense pressures on the country’s national finances.
The Czech Republic has witnessed increased investment in its R&D and the country’s GERD intensity is catching up
with the EU average. However, the nature of investment in R&D is not broad-based. Multinationals dominate the
R&D scene, while many domestic firms struggle to commercialize research. The technology sector is also suffering
because of poor co-operation between businesses and research institutions. The government has also undertaken
major infrastructure projects; however, their sustainability remains a concern due to the poor state of internal R&D
infrastructure funding and a low knowledge base.
The country has a strong business environment with high levels of labor, monetary, trade, investment and financial
freedom. However, the process of starting a business in the Czech Republic is lengthy and considerable
improvements are needed to remove regulatory hassles.
The Czech Republic is party to a number of international environmental treaties and agreements. The government
has also emphasized the need to increase the use of renewable energy to reduce greenhouse gas emissions.
However, its continuing reliance on non-renewable sources as a major source for electricity could harm air quality.
The Czech Republic has already achieved its Europe2020 target regarding renewable energy sources (RES) in terms of
the production of electricity, way ahead of its target time frame. This outperformance indicates that the nation has
great scope to improve its share in terms of RES, so long as it implements the right stimuli and policy support.

PESTLE Analysis
3.2. Political analysis
3.2.1. Overview
The Czech Republic has made a successful transition to democracy and has been credited with fostering democratic
values. The country’s liberal media laws further endorse its democratic principles. However, the country’s political
scene is characterized by high levels of corruption. A notable instance of political corruption in recent times includes
the arrest of eight high-ranking officials from the government of former Prime Minister Petr Necas in June 2013,
which ultimately led to its collapse. Early elections were called in October 2013 after the caretaker government
appointed by President Zeman failed to survive a confidence vote in August 2013. The snap elections did not
produce clear winners, but three parties – the Czech Social Democratic Party (CSSD), ANO 2011 and Christian and
Democratic Union - Czechoslovak People's Party (KDU-CSL) – formed a coalition government. In the October 2017
legislative elections, ANO 2011 emerged as the winner, securing 29.6% of the votes and 78 out of 200 seats in the
Chamber of Deputies. Andrej Babis became the prime minister of the Czech Republic. Due to fraud charges against
Babis, other mainstream parties have decided not to form a coalition government with ANO 2011. There were
increasing protests against Babis during May and June 2019, demanding his resignation over an EU audit report
draft, implicating Babis over allegations of breaching EU conflict of interest rules. With Babis refuting the allegations
and refusing to resign, the country’s political landscape is expected to remain intense in the second half of 2019.
Table 3: Analysis of the Czech Republic's Political Landscape
Current Strengths Current Challenges

• Successful transition to democracy • Increasing protests regarding the prime minister
• Freedom of the press and possible political uncertainties
Future Prospects Future Risks

• Improving the fight against corruption • Deteriorating government integrity
Source: MarketLine ©MARKETLINE
3.2.2. Current strengths
Successful transition to democracy

The Czech Republic was ranked considerably high in terms of the satisfaction towards its transition to democracy and
multiparty politics. The country scored in the 76.85 percentile in terms of the voice and accountability parameter in
the World Bank’s Worldwide Governance Indicators 2018. This parameter reflects perceptions of the extent to which
a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom
of association and a free media. In comparison, its neighboring nation Slovakia had a score of 75.86.
Freedom of the press

The Czech Republic guarantees freedom of the press through its Charter of Fundamental Rights and Freedoms. There
are very few formal restrictions on the free expression of opinion, with both public and private media being able to
PESTLE Analysis
express subjective views without the influence of the government or partisan pressure. The Czech constitution also
provides far reaching access to government information, which has consistently improved due to the increase in the
quantity and quality of electronic portals for public administration. However, in recent times, there are concerns
over the openly hostile attitude of the incumbent President Zeman towards journalists and the media. Still, due to
the nation’s comparatively liberal attitude towards the press, Reporters Without Borders has ranked the Czech
Republic 40th out of 180 countries in its ‘2019 World Press Freedom Index Rankings’. Liberal media laws have also
been bolstered by a favorable Constitutional Court and other institutional rulings in the past.
3.2.3. Current challenges
Increasing protests regarding the prime minister and possible political uncertainties
A modified version of the law on conflict of interest with stringent stances came into effect in the Czech Republic in
2017. The new provisions prevent firms owned by ministers and public officials from receiving state subsidies while
stopping them from accessing investment aid or participating in public tenders of any kind. The law also aims to limit
media ownership by public officials. The law was introduced as an effective method to reduce the mismanagement
of government funds and promote anti-corruption policies. Incumbent Prime Minister Andrej Babis, who owns
Agrofert conglomerate, is alleged to have illegally benefited from EU subsidies; the Czech Police initiated criminal
proceeding against him in 2017. Based on the reports from the European Anti-Fraud Office (OLAF) and subsequent
investigations, the Czech Police recommended indicting Babis on charges of fraud in April 2019. Protests against
Babis have since intensified. The leaked disclosure of a European Commission (EC) auditors’ preliminary report
indicates that Babis violated the conflict of interest rules; for the same reason, the country may have to return the
subsidies illegally gained by Agrofert. On June 4, 2019, 120,000 people gathered in Prague as part of a protest rally,
which is considered to be one of the largest Czech protests since the Velvet Revolution in 1989. Babis continues to
refute the allegations, as well as calls for his resignation and for him to face the trial. The protests are expected to
intensify as the protesters called for a larger demonstration on June 23, 2019. Any use of intense force by the
administration to pacify the protesters could push the country deeper into political chaos and uncertainty, which
could have an impact on the democracy the nation has enjoyed since 1993.
3.2.4. Future prospects
Improving the fight against corruption

The Czech Republic has been plagued by corruption scandals, including those involving high-profile politicians, over
the past decade. According to the ‘Corruption Perceptions Index 2018’, published by Transparency International, the
country came 38th out of 180 countries, with a score of 59 out of 100. Over the past six years, the country has
witnessed a considerable improvement in its index score from 48 in 2013. However, it ranked poorly in comparison
to its neighboring countries and major economies in Europe, such as Germany, Austria and Germany, in 2018. The
country has lot more scope to improve its governance landscape by strengthening its anti-corruption policies and
regulations.

PESTLE Analysis
Figure 2: Corruption Perceptions Index Score for the Czech Republic, 2013–2018
61.0
Corruption Perceptions Index Score, 0 (High Level of
59.0
Corruption) - 100 (Lack of Corruption)
57.0
55.0
53.0
51.0
49.0
47.0
45.0
2013 2014 2015 2016 2017 2018
Source: Transparency International ©MARKETLINE

PESTLE Analysis
Figure 3: Corruption Perceptions Index Scores, 2018
Austria 76.0
100.0
Czech Republic Denmark 88.0
80.0
59.0
60.0
Slovakia 40.0 France 72.0
50.0 20.0
0.0
The US Germany 80.0
71.0
The UK Italy
80.0 52.0
Slovenia Poland
60.0 60.0
Source: Transparency International ©MARKETLINE
3.2.5. Future risks
Deteriorating government integrity

In the Economic Freedom Index, prepared by the Heritage Foundation for 2019, the country’s score for the
government integrity parameter declined from 55.9% in 2017 to 52.1% in 2019. Its score is also lower than the
European average of 55.8% in 2019. In the October 2017 legislative elections, ANO 2011 emerged as the winner
securing 29.6% of the votes and 78 out of 200 seats in the Chamber of Deputies. However, due to fraud charges
against Andrej Babis, the prime minister candidate from ANO 2011, other mainstream parties have decided not to
form a coalition government with ANO 2011. This led to a decline in the country’s score for this parameter compared
to the index in 2018. In April 2019, when the Czech Police recommended fraud charges against Babis, Babis replaced
the Minister of Justice with Marie Benesova, who is considered as a close ally of Babis. These kind of administrative
decisions signal a deepening crisis in terms of the government’s integrity and governance.

PESTLE Analysis
3.3. Economic analysis
3.3.1. Overview
The Czech economy has well-developed infrastructure and an excellent automotive industry. The country’s banking
sector continues to show resilience, with high liquidity buffers and the efficient management of its non-performing
loans (NLPs). However, under the current administration, the positive fiscal balances are expected to turn negative
from 2019 as the government is planning generous spending policies, including high rail subsidies and wage
increases. A lack of diversification in the export base is a cause for concern, with more than 80% of exports
concentrated in the EU block. This could result in vulnerability to external shocks – especially as economic growth
depends significantly on exports.
Table 4: Analysis of the Czech Republic's Economic Landscape

• Well-developed infrastructure • Declining current account surplus
• Robust automotive industry • Shrinking labor force and shortage of skilled labor

• Banking sector to remain resilient • Export dependence on the EU economies
Well-developed infrastructure
The country has robust infrastructure. According to CzechInvest, infrastructure in the Czech Republic is one of the
best among the Central and Eastern European nations. The country is endowed with one of the densest railway
networks in Europe, along with direct highway connections to Germany, Slovakia and Poland. The country also has
an extensive trans-European railway network and four transit corridors across the country. As per the World Bank's
logistics performance index (LPI), transport and logistics infrastructure in the Czech Republic improved over the last
two years with an upward jump in rank to 22nd in 2018 from 26th out of 160 countries in 2016.
Robust automotive industry

The automotive industry is one of the pillars of the Czech economy, with the country being a key automotive
manufacturing center for companies such as Skoda, Hyundai, Toyota Peugeot, and Citroen (the latter three have a
jointly run plant). According to CzechInvest, around 800 companies are active in the country’s automotive industry,
offering more than 160,000 direct jobs as in 2018. Around 26% of the nation’s manufacturing output, as well as 24%
of the Czech Republic’s total exports, come from the automotive industry. The nation produced 1.44 million cars in
2018, while the automotive industry alone contributed 9% of the nation’s GDP in 2018.

PESTLE Analysis
Declining current account surplus

The nation’s current account surplus stood at 1.1% of GDP in 2017, which declined sharply to 0.2% of GDP in 2018. It
is expected to post a deficit of -0.6% of GDP in 2019, according to the International Monetary Fund (IMF). According
to MarketLine, it is expected that the share of exports as a percentage of GDP will reduce to 90.5% in 2019, from
93.6% in 2018. An economic slowdown among the Czech Republic’s major trading partners across EU, especially in
Germany, will have a major impact on the country’s export scenarios. However, owing to the increased
governmental spending and wage rise, domestic demand is expected to continue its moderate growth, around 3.2%
in 2019, according to the Organisation for Economic Co-operation and Development (OECD) forecasts. The Czech
Republic is expected to witness a current account deficit of 1.08% of GDP during 2019–2023.
Figure 4: Current Account Balance as a Percentage of GDP, 2014–2023f
2.0
1.5
Current Account Balance as a Percentage of GDP
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
2014 2015 2016 2017 2018 2019f 2020f 2021f 2022f 2023f
Source: IMF ©MARKETLINE
Shrinking labor force and shortage of skilled labor

The Czech Republic’s workforce is witnessing a declining trend, with a fall from 49.70% of the total population in
2017 to 49.47% of the total population in 2018. The same is forecast to decline further to 48.35% by 2023, according
to MarketLine. The country also faces a shortage of skilled laborers compared to its peer nations in the EU. As of
2017, tertiary education attainment among the Czech population stood at 23.9%, which is much below the OECD

PESTLE Analysis
average of 36.5% and G-20 average of 29.75%. The situation presents a challenge for the government as it drives
down the nation’s competitiveness and innovation capabilities.
Figure 5: Labor Force as a Percentage of the Total Population, 2009–2023f
50.5
Labor Force as a Percentage of the Total Population
50.0
49.5
49.0
48.5
48.0
47.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019f 2020f 2021f 2022f 2023f
Source: Country Statistics, MarketLine ©MARKETLINE

PESTLE Analysis
Figure 6: Share of Population by Tertiary Education Attainment (%), 2017
50.0
Share of Population by Tertiary Education Attainment (%)
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Austria
The UK
The US
Italy
Chile
Poland
Australia
Slovenia
OECD Average
Slovakia
G20 Average
Spain
Luxembourg
Switzerland
Hungary
Germany
Latvia
France
The Netherlands
Sweden
Estonia
Portugal
Greece
Belgium
Czech Republic
Source: OECD ©MARKETLINE
Banking sector to remain resilient

The Czech banking sector has been performing better than its peers in Central and Eastern Europe (CEE) in terms of
both profitability and liquidity. According to the European Banking Federation (EBF), though the amount of total
assets retained by the EU banks declined in 2017, the Czech banks witnessed an increase in their holdings by 23.9%.
The Czech banking sector remains one of the few profitable banking sectors in the region despite subdued demand
from both domestic households and corporations. In terms of bank profitability, the Czech banks recorded a return
on equity (ROE) at around 13.0% in 2017. The resilience of the sector, coupled with the sound balance sheets of
households and corporates, will help the economy to shield itself from any effects emanating from the crisis in the
Eurozone.

PESTLE Analysis
Figure 7: Return on Equity Amongst EU Banks by Country (%), 2017
20.0
15.0
10.0
Return on Equity (%)
5.0
0.0
-5.0
-10.0
-15.0
Romania
Croatia
The UK
Poland
Lithuania
Bulgaria
Cyprus
Slovenia
Germany
Luxembourg
Italy
Malta
Finland
Estonia
Slovakia
Denmark
Ireland
France
Spain
Sweden
Latvia
The Netherlands
Hungary
Greece
Portugal
Austria
Belgium
Czech Republic
Source: European Banking Federation ©MARKETLINE
3.3.5. Future risks
Export dependence on the EU economies

The openness of the Czech economy and its strong integration into EU manufacturing supply chains, predominantly
in the automotive sector, exposes it to external shocks. Around 80% of the country’s exported goods were directed
to the EU in 2018; exports to Germany alone constituted 32.2% of total exports by value according to the
International Trade Centre. By contrast, exports to emerging markets, including Brazil, China, Russia, India, Indonesia
and Turkey together accounted for a mere 5% of the Czech Republic’s total exports in 2018 . The sluggish demand
from EU economies is expected to impact the manufacturing industry and the country’s GDP growth considerably in
2019. Considering that the country is highly dependent on exports for its economic growth, it needs to diversify into
emerging markets to better handle contingencies.

PESTLE Analysis
3.4. Social analysis
3.4.1. Overview
The Czech Republic has had a system of compulsory insurance in place since 1992, along with fee-for-service care.
The healthcare system in the Czech Republic is quite decentralized and considered one of the best in Europe. The
incumbent government under Babis is also introducing reforms related to minimum wage and pension systems.
According to the European Commission, the country will see a surge in the aging population in the first half of this
century, which will create immense pressures on the country’s national finances.
Table 5: Analysis of the Czech Republic's Social Landscape

• Strong healthcare sector • Conflict regarding the EU’s migration policies

• Reforms to strengthen the social landscape • Aging population
Strong healthcare sector

Healthcare services in the Czech Republic are well developed, and the country is considered to have extensive reach
and coverage in terms of its services compared to its neighboring nations, such as Slovakia. According to the ‘Euro
Health Consumer Index 2018’, published by the Health Consumer Powerhouse, the Czech Republic was ranked 14th
amongst the 35 nations in Europe in terms of the quality of its healthcare system. In comparison, Slovakia was
ranked 17th, Italy 20th, Greece 29th and the UK was ranked 16th.
Conflict regarding the EU’s migration policies

The country’s political parties are opposed to the European Commission’s proposal on binding quotas to distribute
migrants among the EU member states. In July 2015, the government agreed to allow the migration of 1,500
refugees into the country by 2017. Politicians across the whole political spectrum (which includes both the right and
left) have opposed the relocation of migrants, especially in the Schengen area. The issue has sparked differences
within the three-party coalition and also between the president and the government. The country’s political parties
are reflecting the general view of the people, who oppose the acceptance of refugees from Syria and North Africa. In
March 2018, Prime Minister Andrej Babis said that the Czech government will not accept any quota imposed by the
European Union. In October 2018, Babis reaffirmed his policy stance regarding the need for illegal migrants to be
sent to their respective home nations and the need to help the migrants at their home states to reduce migrant

PESTLE Analysis
inflows. The prime minister also indicated that the country will defend itself against any legal action imposed on
them by the EU regarding the nation’s migration related policies.
Reforms to strengthen the social landscape

The incumbent three-party (ANO 2011, Czech Social Democratic Party [CSSD], and the Communist Party of Bohemia
and Moravia [KSCM]) coalition government is aiming to implement a host of social reforms relating to the country’s
minimum wage, pension and healthcare systems. It plans to increase the minimum wage to as high as 40% of the
national average wage. Furthermore, it seeks to reform the pension system through amendments to the Pension
Act, while introducing measures to ensure the long-term sustainability of the public pension system and an
acceptable level of pensions. Since 2015, the pensions have been indexed to the rate of inflation and one-third of the
rate of growth in real wages. The coalition raised the minimum wage by 11% in January 2017, but its eventual goal is
to bring it to 40% of the national average wage. For 2018, the government raised the minimum monthly wage from
CZK11,000 (US$470.56) to CZK12,200 ($561.44), which became effective from January 1, 2018. From January 1,
2019, the monthly wage was further revised to CZK13,350 (US$593.51). In the 2019 budget, the government also
proposed an increase in pensions, along with public sector salaries. It also introduced a free inter-city public
transport travel scheme for pensioners and students.
3.4.5. Future risks
Aging population
Like most Western European countries, the Czech Republic will witness demographic challenges due to the declining
birth rate and an aging society. According to the UN, the percentage of population aged 60 or over for the Czech
Republic is expected to reach 37.0% by 2050, from 24.9% in 2015. According to OECD, the old-age dependency ratio
(over-65 population as a share of working-age (15 to 64) population) for the Czech Republic will rise sharply from
28.75% in 2015 to 58.9% by 2050, a rise of 30.1 percentage points. This will affect the economy, as the working age
population‘s contribution to support the non-working will decrease in the future. An aging population results in a
reduced workforce, which in turn puts pressure on government income due to lower tax revenue. An increase in
welfare schemes and statutory pensions to support old retirees also add burden to the government’s finances. As a
result, one of the highest levels of age-related fiscal pressures in the EU will be created in the Czech Republic. The
government has to tackle demographic changes through new social reforms; otherwise, it is likely to put pressure on
public finances and the labor market in the long run.

PESTLE Analysis
Figure 8: Old-Age Dependency Ratio, 2015, 2025 and 2050
80.0
70.0
Old-Age Dependency Ratio
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Spain
Portugal
Denmark
Ireland
France
Germany
Poland
Italy
Sweden
The UK
The Netherlands
Belgium
OECD Average
Czech Republic
2015 2025 2050

PESTLE Analysis
3.5. Technology analysis
3.5.1. Overview
The Czech Republic has witnessed increased investment in its R&D and the country’s GERD intensity is fast reaching
the EU average. However, the nature of investment in R&D is not broad-based. Multinationals dominate the R&D
scene, while many domestic firms struggle to commercialize their research. The technology sector is also suffering
because of poor co-operation between businesses and research institutions. The government has also undertaken
major infrastructure projects; however, their sustainability remains a concern due to the poor state of internal R&D
infrastructure funding and a low knowledge base.
Table 6: Analysis of the Czech Republic's Technology Landscape

• Increasing investment in R&D • Poor high technology exports

• Improving collaboration between industry and • Sustainability of R&D infrastructure initiatives
public research
• Sustaining political commitment to technological
development
Increasing investment in R&D

According to the OECD, the Czech Republic’s gross domestic expenditure on research and development (GERD)
intensity improved from 1.56% in 2011 to 1.79 % in 2017. It is also fast converging with the EU28 average (1.96% of
GDP). According to the ‘Global Competitiveness Report 2018’, published by the World Economic Forum, the Czech
Republic ranked 20th out of 140 nations in terms of R&D expenditure as a percentage of GDP. In terms of the quality
of research institutions index, the country was ranked 25th out of 140 nations. Under the GESHER/MOST program,
the Czech Republic and Israel are providing grants to Czech companies to undertake R&D projects covering ICT,
sustainable technologies, agriculture and food processing technology, biotechnology, medical technology and
engineering (especially new materials, nanotechnology, cybernetics and robotics). The government also provides tax
breaks for R&D co-operation between universities, public scientific research institutions and companies.

PESTLE Analysis
Figure 9: Gross Domestic Expenditure on Research and Development (GERD) as a Percentage of GDP, 2017
2.5
GERD as a Percentage of GDP
2.0
1.5
1.0
0.5
0.0
2011 2012 2013 2014 2015 2016 2017
Czech Republic EU 28 Average OECD Average
3.5.3. Current Challenges
Poor high technology exports

Technology exports as a percentage of manufactured exports in the Czech Republic were below the global average in
2017, according to the World Bank. This indicates that amidst the increasing R&D expenditure, the country has failed
to channel it into high-technology exports (as a percentage of manufactured exports). This inherently shows the
weakness in the nation’s technological landscape in terms of the level of innovation and technological
advancements. In 2017, Czech high-technology exports as a percentage of manufactured exports stood at 12.77%,
while the world average for the same was 16.1%. The country also lags considerably in terms of acquiring patents
compared to many of its regional peers. According to the United States Patent and Trademark Office (USPTO), the
Czech Republic received 350 patents in 2018, in contrast to the 17,568 patents received by the Germany and 6,907
patents received by France the same year. However, the Czech Republic’s performance is better than its neighboring
nation Slovakia, which received only 26 patents from the USPTO during 2018.

PESTLE Analysis
Figure 10: High-technology Exports as a Percentage of Manufactured Exports, 2007–2017
19.0
High-technology Exports as a Percentage of Manufactured Exports
18.0
17.0
16.0
15.0
14.0
13.0
12.0
11.0
10.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Czech Republic EU Average World Average
Source: The World Bank ©MARKETLINE

PESTLE Analysis
Figure 11: Number of Patents Granted by the USPTO, 2018
8,000.0
7,000.0
Number of Patents Granted
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
1,000.0
0.0
Poland
The UK
France
Slovakia
Hong Kong
The Netherlands
Portugal
Belgium
Austria
Czech Republic
Source: USPTO ©MARKETLINE
Improving collaboration between industry and public research

The Czech government established the Technology Agency of the Czech Republic (TA CR) in 2019 to stimulate
cooperation between research organizations and the business sector. TA CR has several schemes and programs –
such as Alpha, Beta, Gamma, Delta, Epsilon and Omega – which support applied research and experimental
development and innovation (R&DI) across various sectors, including transport, energy, public administration,
sustainable development, new technologies, social sciences and environment. The TA CR also runs a Competence
Centre program, which is entirely devoted to promoting long-term partnerships between research organizations and
businesses. TA CR also engages consistently in building strong research partnerships with similar international
agencies. Such initiatives are anticipated to help the country realize its innovation potential through the better
commercialization of research activities.
Sustaining political commitment to technological development
The Czech Republic provides substantial subsidies for R&D expenditure. The B index measures the before-tax income
needed by a firm to break even on US$1 of R&D outlay. The 1 minus the B index shows the government’s generosity
in terms of giving R&D incentives, especially for small and medium enterprises. According to the OECD, R&D
subsidies in the Czech Republic are amongst the highest within the OECD countries. The Czech economy needs to
boost its R&D initiatives in order to raise the productivity and living standards of its people.

PESTLE Analysis
Figure 12: Tax Subsidy Rates on R&D Expenditures, 2017
0.5
0.4
0.3
0.2
1-B Index
0.1
0.0
- 0.1
Italy
The UK
The US
Belgium
France
Sweden
Poland
Russia
Germany
The Netherlands
Czech Republic
Ireland
Portugal
Hungary
China
Spain
Switzerland
Large, profitable firm SME, profitable firm Large, loss-making firm SME, loss-making firm
3.5.5. Future risks
Sustainability of R&D infrastructure initiatives

In the recent past, the government has approved multi-million dollar research projects that are expected to have a
profound influence on the country’s research output. Although the bulk of the initial funding comes from the
European Regional Development Fund, the government will have to bear the salary, maintenance and operational
costs of many of the infrastructure development programs. This will put pressure on existing R&D budget outlays,
which if not expanded, might lead to the deterioration of existing infrastructure development efforts. In fact, the
share of government spending on R&D as a percentage of GDP has declined considerably over the past decade.
Another bottleneck in the successful development of infrastructure is the availability of human resources. In recent
years, tertiary education in social sciences and humanities has had more takers than science and technology. The
number of PhD graduates has almost stagnated. Large research centers, post their development, would require well-
qualified and experienced personnel, to be drawn either from existing research facilities or by attracting foreign
workers. The latter is going to prove difficult given the funding constraints of the government and often the below
EU average pay earned by Czech scientists.

PESTLE Analysis
Figure 13: Share of Government R&D Expenditure in Total R&D Expenditure, 2008–2017
50.0
45.0
Share of Government R&D Expenditure
in Total R&D Expenditure (%)
40.0
35.0
30.0
25.0
20.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Eurostat ©MARKETLINE

PESTLE Analysis
3.6. Legal analysis
3.6.1. Overview
The country has a strong business environment with high levels of labor, monetary, trade, investment and financial
freedom. However, the process of starting a business in the Czech Republic is lengthy and considerable
improvements are needed to remove regulatory burdens.
Table 7: Analysis of the Czech Republic's Legal Landscape

• Amiable business environment • Complexity of procedures required to start a
• Openness to foreign investment business

• Improving the process of starting a business • Lack of product market competitiveness
Amiable business environment

The Czech Republic is ranked as the 23rd freest economy in the world by the ‘2019 Index of Economic Freedom’,
published by the Heritage Foundation and the Wall Street Journal, with a score of 73.7 out of 100. It was placed 13th
amongst 44 countries from the European region. Furthermore, the country’s overall score was much higher than the
regional average of 68.6%. The country’s high levels of property rights, low tax burdens, robust fiscal health, and high
level of freedom related to monetary, trade, investment and financial landscapes are considered its strengths. Labor
regulations are relatively flexible and labor management relations are generally cordial.
Openness to foreign investment
As a member of the EU, the Czech Republic provides a reasonably hospitable climate for foreign investment.
According to the UN Conference on Trade and Development, total foreign direct investment (FDI) stock increased to
US$155.02bn in 2018, from US$121.85bn in 2016. According to the OECD, FDI restrictions in the Czech Republic are
some of the lowest in the OECD region and the number of restrictions is way below its neighboring nations, including
Germany, Slovakia, Poland and Austria. Nevertheless, the government could still open up more sectors that still have
some restrictions for foreign investments, especially the transport sector, including the aviation segment. This will
help to attract additional foreign capital, given the country’s reputation of being investment-friendly.

PESTLE Analysis
Figure 14: FDI Regulatory Restrictiveness Index, 2018
0.12
FDI Regulatory Restrictiveness Index, 0 (Least Restrictive) -
0.10
0.08
0.06
1 (Most Restrictive)
0.04
0.02
0.00
The UK
Turkey
Italy
Poland
Switzerland
Norway
The US
Slovenia
OECD Average
Spain
Germany
Hungary
Ireland
France
Slovakia
The Netherlands
Greece
Sweden
Austria
Portugal
Belgium
Czech Republic
Complexity of procedures required to start a business

In the World Bank’s Doing Business 2019 report, the country was ranked 35th globally in terms of its overall doing
business scores (out of 190 nations). However, to start a business, the procedures in the Czech Republic are
considered to be cumbersome, with the nation being ranked 115th out of 190 countries. It takes eight procedures
and 24.5 days in the Czech Republic to start a business, while the average amongst OECD high income nations stood
at 4.9 procedures and 9.3 days. These statistics indicate that there is further scope to ease the procedural burden.
The country has to simplify and reduce its procedures and improve the regulatory framework in order to achieve
this.
Improving the process of starting a business

Over the past five years, the government has undertaken various steps to improve the country’s business climate.
The government has made contract enforcement easier by revising its civil procedure code and amending the
monetary jurisdictions of its courts. In addition, the government is also making access to credit easier by reforming
legal regimes regarding secured transactions, permitting the registration of receivables at the collateral registry and
authorizing the out-of-court enforcement of collaterals. These steps are positive and will encourage start-ups. The
PESTLE Analysis
country is also reforming the process of starting a business by reducing the cost and the time required to register the
company in the commercial courts. As a part of the reform measures, notaries are allowed to register the companies
directly online. Further reforms, especially the tax reform which reduces the compliance costs, will help to
strengthen the business and investment climate considerably.
3.6.5. Future risks
Lack of product market competitiveness

Product market indicators are a set of metrics that measure the extent to which policies framed by the government
promote or inhibit competition in areas where competition is possible. Many of the sectors in the Czech Republic are
regulated to a greater extent than their European counterparts. According to the ‘Global Competitiveness Report
2018’, the Czech Republic ranked 47th out of 140 nations in terms of product market competitiveness and was
ranked below many of the major economies in the European region. This is indicative of a less competition-friendly
market and monopolies in various sectors. High regulation depresses the purchasing power of households due to
higher costs of production. Moreover, the easing of regulations will attract investment in a number of sectors, which
will open up new avenues of employment. Because of inadequate competition, services are generally priced high.
Figure 15: Product Market Competitiveness, 2018
80.0
Product Market Competitiveness Score, 0 (Highly
70.0
Regulated) - 100 (Higly Competitive)
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Finland
Portugal
Germany
Norway
Lithuania
Poland
Malta
Slovenia
Australia
Italy
Cyprus
Switzerland
Denmark
Luxembourg
Romania
Latvia
Spain
France
Ireland
Czech Republic
Estonia
Sweden
Belgium
Austria
Netherlands
United Kingdom

PESTLE Analysis
3.7. Environmental analysis
3.7.1. Overview
The Czech Republic is party to a number of international environmental treaties and agreements. The government
has also emphasized the need to increase the use of renewable energy to reduce greenhouse gas emissions.
However, the country’s continuing reliance on non-renewable sources as a major source for electricity could harm
air quality. Despite this, the Czech Republic has already achieved its Europe2020 target regarding renewable energy
sources (RES) in terms of the production of electricity, way ahead of its target time frame. This outperformance
indicates that the nation has greater scope to improve its RES share, provided it has the right stimuli and policy
support.
Table 8: Analysis of the Czech Republic's Environmental Landscape

• Participation in global environmental pacts • Poor performance in terms of eco-innovation
• High environment tax to GDP ratio outputs and resource efficiency outcomes

• Government initiatives • Distorted pricing
Participation in global environmental pacts

The Czech Republic ratified the United Nations Framework Convention on Climate Change in 1993, recognizing the
climate change problem and the need to resolve it. It subsequently ratified the Kyoto Protocol in 2001. The country
is also party to numerous other environmental agreements that cover wetlands, biological diversity, desertification,
the illegal trade of endangered species, whaling, trans-boundary air pollution, the protection of the ozone layer, and
hazardous waste and its disposal. As a part of the Paris Climate Agreement of 2015 (COP21), the government has
pledged to bring down its greenhouse emission levels by at least 40% by 2030 in comparison to 1990 levels.
High environment tax to GDP

The country’s total environment tax to GDP ratio was 2.15% in 2016, much higher than that of the OECD average of
1.63%. Environmental taxes are taxes levied to control problems such as the deterioration of the environment;
higher taxation in this sphere indicates the government’s approach to controlling problems relating to the
environment. As per the OECD, environmental taxes are an important parameter in measuring a government’s
efforts to control emissions. For instance, a higher tax wedge on energy products might encourage consumers to
explore other sources of energy, which can push the consumption of cleaner energy, while a lower tax wedge will
lead to overconsumption and may lead to pollution.

PESTLE Analysis
Figure 16: Environmental Taxation as a Percentage of GDP, 2016
4.5
Environmental Taxation as a Percentage of GDP
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
OECD Average
The US
Ireland
Belgium
Norway
Australia
Slovakia
Poland
The UK
Bulgaria
Switzerland
Slovenia
Germany
Italy
Denmark
Spain
Sweden
Romania
Hungary
The Netherlands
Portugal
Austria
Czech Republic
Poor performance in eco-innovation outputs and resource efficiency outcomes

According to the ‘Eco-Innovation Index 2017’, published by the European Commission, the country lags considerably
behind the EU28 average and was ranked fourth from last in terms of its resource efficiency outcomes. The country
received an index score of 44 for its resource efficiency outcomes. In contrast, its neighboring nations Austria,
Germany and Slovakia scored 128, 121 and 87, while Luxembourg achieved the highest score of 183 in 2017. The
country also lags behind the EU28 index value of 100 in terms of eco-innovation outputs, with a score of 49 in 2017.
These low index scores indicate that the Czech Republic needs to have more targeted and effective environmental
policies to improve its resource efficiency use, as well as its impact and reach in terms of society.

PESTLE Analysis
Figure 17: The Eco-Innovation Index, 2017
Eco-innovation input
180
150
120
90
Socio-economic Eco-innovation
60
outcomes activities
30
0
Resource-efficiency
Eco-innovation output
outcomes
Czech Republic EU28 Average Germany
Source: European Commission ©MARKETLINE
Share of energy from renewable sources

According to Eurostat, for the Czech Republic, the share of energy from renewable sources in terms of its gross final
energy consumption stood at 14.8%, below the EU28 average of 17.5%, for 2017. However, it is above the Europe
2020 target of 13% for the nation. Around 35% of the nation’s electricity production is from nuclear resources and
through the adoption of the Czech National Action Plan for Nuclear Energy in 2015, the nation aims to increase its
nuclear based electricity production share to 50% of total electricity produced by 2040. In the long run, the country
also aims to reduce its reliance on coal power, which has around a 50% share in the present electricity production
scenario, to approximately 20% through the improvement of renewable energy sources. However, to achieve this,
additional efforts in the form of consistent investments and policy measures to incentivize the production and
consumption of energy from renewables will be required over the next 10 years. According to the International
Trade Administration, the country is expected to invest around an average of US$3bn annually over the next 10
years to improve its renewable energy sources.

PESTLE Analysis
Figure 18: Energy Consumption from Renewable Sources as a Percentage of Gross Final Energy Consumption, 2017
80.0
Energy Consumption from Renewable Sources as a
70.0
Percentage of Gross Final Energy Consumption
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Denmark
Hungary
Romania
Spain
Portugal
Finland
Greece
Ireland
Poland
France
Italy
Slovenia
Norway
EU28 Average
Austria
Sweden
The Netherlands
Belgium
The UK
Czech Republic
Source: European Commission ©MARKETLINE
3.7.5. Future risks
High level of air pollution

Air quality in the Czech Republic, especially in the northern region, is considered poor, with high instances of PM2.5
exposure. According to the ‘Environmental Performance Index’ published by Yale University, the Czech Republic
performed poorly in terms of air quality with a score of 65.77 out of 100 in 2018, ranking 97th amongst 180 nations.
In 2016, the country was ranked 75th with a score of 70.26 out of 100. In terms of PM2.5 exposure, the country was
ranked 154th out of 180 nations in 2018, with a deteriorating performance in rank from 148th in 2016. The country
needs to improve its strategies, including strengthening its policies and regulations regarding the mitigation of the
causes of pollution. However, with further industrialization and urbanization to sustain the nation’s growth
prospects, pressure on the environment is only expected to grow in the near future.

Political Landscape
4. Political Landscape
4.1. Summary
The Czech Republic returned to democracy during the 10-year tenure of the veteran anti-communist dissident-
turned-President Vaclav Havel (1993–2003). Vaclav Klaus, who was elected the prime minister of the former Czech
and Slovak Federal Republic after the 1992 elections, continued until 1998 as the Czech Republic’s prime minister
after the country’s split. He went onto become the country’s second president in 2003, a position he held until 2013.
Another former Prime Minister Milos Zeman succeeded him.
The center-right administration of Prime Minister Klaus was replaced in 1998 by a minority Czech Social Democratic
Party (CSSD) government. The CSSD were in power until 2006, when Mirek Topolanek of the Civic Democrats (ODS)
was called to form the government. The Topolanek administration stayed in power amid great political uncertainty,
eventually losing a no-confidence motion in March 2009. An independent cabinet under Jan Fischer then led the
government until an ODS-led coalition government with Petr Necas as prime minister replaced it. Although Prime
Minister Necas started on an anti-corruption footing, his government was fraught with allegations of corruption,
which eventually led to its downfall in June 2013. Following the resignation of Necas’s center-right government,
President Zeman appointed a caretaker government led by Jiri Rusnok; however, its failure to win a confidence vote
in August 2013 brought in early elections. In the elections held in October 2013, the CSSD emerged as the largest
party, followed by the newly formed ANO 2011. In January 2014, CSSD, ANO 2011 and the Christian and Democratic
Union – Czechoslovak People's Party (KDU–CSL) formed a coalition government with CSSD Chairman Bohuslav
Sobotka as the prime minister. In the October 2017 legislative elections, ANO 2011 emerged as the winner, securing
29.6% of the votes and 78 out of 200 seats in the Chamber of Deputies. However, due to fraud charges against
Andrej Babis, the current prime minister of the Czech Republic from ANO 2011, other mainstream parties have
decided not to form a coalition government with ANO 2011. Andrej Babis was sworn in as the 12th prime minister of
the Czech Republic in December 2017. However, Babis is experiencing nationwide protests demanding his
resignation, especially since the recommendation of Czech Police towards indicting Babis on charges related to EU-
subsidies fraud in April 2019. In June 2019, Prague witnessed one of the biggest gatherings and protests by the
Czechs since the velvet revolution of 1989. With Babis continuing to deny the allegations and refusing to resign, the
Czech Republic is expected to witness more widespread and intense protests against the incumbent administration
during the latter half of 2019.
4.2. Evolution
4.2.1. Pre-2000
The Czech Republic came into being in 1993 after the former Czechoslovakia broke into two countries, the other
being Slovakia. Subsequently, Vaclav Havel was elected president of the republic, a position he held until 2003,
which included a re-election in 1998. Vaclav Klaus, who was the prime minister of the former Czech and Slovak
Federal Republic after the 1992 elections, continued as the Czech Republic’s prime minister after the country’s split.
In 1996, he was reappointed as prime minister in a minority coalition government in the country's first general
elections after independence. However, in the following year, Klaus’s government resigned after the coalition
collapsed due to the mounting opposition to economic reforms, as well as allegations of financial corruption.
Following this, a caretaker government headed by Josef Tosovsky was put in place. In the 1998 general elections,
Milos Zeman of the CSSD was elected as the prime minister. Although the CSSD government was a minority

Political Landscape
government, the signing of an “opposition agreement” with the ODS allowed it to serve a full term. In January 2000,
the ODS renewed its agreement to support the minority government.
4.2.2. 2001–2010
In April 2001, Vladimir Spidla was elected chairman of the ruling CSSD after Prime Minister Zeman stepped down as
party chief, although he continued as prime minister until the elections. Under Spidla’s leadership, the CSSD won the
2002 elections with 70 seats in parliament, subsequently forming a coalition government with the centrist alliance of
Christian Democrats and Freedom Union. In February 2003, former Prime Minister Klaus was elected as the
president.
In 2004, the Czech Republic joined the EU after a referendum in 2003 gave full support to accession. In July 2004,
following a disastrous performance in the previous month’s elections to the European Parliament, the then Prime
Minister Spidla had to resign in favor of his party colleague and former interior minister, Stanislav Gross. The party
lost support due to its controversial program of tax increases and expenditure cuts aimed at improving the state of
public finances. The new prime minister survived an early test, narrowly winning a parliamentary no-confidence vote
in August 2004. However, he resigned in April 2005 due to his involvement in a scandal over the financing of a luxury
apartment. He was succeeded by Jiri Paroubek, the former deputy leader of the CSSD.
Instead of resolving the political deadlock, the June 2006 elections to the Chamber of Deputies only compounded the
political confusion. While the ODS managed to win the highest number of seats in the house overall, the seats were
equally divided between the two opposing coalitions. Mirek Topolanek, leader of the ODS, was called upon to form
the government. However, Topolanek failed to win the confidence of the house one month later, leading to his
resignation. Attempting to resolve the political deadlock, President Klaus reappointed the center-right candidate
Topolanek as a caretaker Prime Minister in November 2006. The political scenario, nevertheless, remained
uncertain, hinting at the likelihood of early elections in 2007. The Topolanek government survived another no-
confidence motion in January 2007, winning by 101 votes to 97. However, in late March 2009, the Topolanek
government lost a confidence vote in the parliament, leading to the collapse of the unstable government.
In April 2009, Topolanek's ODS, the CSSD and the KDU–CSL agreed to back an independent cabinet led by the head of
the State Statistics Agency Jan Fischer. Fischer acted as the interim prime minister, heading the caretaker
government, from May 2009 to June 2010. It was during his tenure that the country was due for early elections in
October 2009. However, on September 2, 2009, the constitutional court suspended the elections to hear a suit by a
parliamentary deputy Milos Melcak. Melcak argued that the pre-term elections were unconstitutional and violated
his right to serve a full four-year term.
4.2.3. 2010 onwards
In June 2010, the ODS leader Petr Necas formed a coalition government with the support of the right-wing Tradition
Responsibility Prosperity 09 (TOP 09) party and the centrist Public Affairs (VV) party. Facing a growing fiscal deficit,
the Necas government proposed a 10% pay cut for public sector workers and announced strict spending controls in
September 2010. These austerity measures triggered mass protests in Prague. In the October 2010 mid-term
elections, the opposition CSSD took control of the Senate and mustered the parliamentary clout necessary to
obstruct the austerity plans.
In April 2011, two VV MPs Krisyna Koci and Jaroslav Sarka alleged that the de facto leader of the party Vit Barta
bribed them for loyalty and for overlooking his irregular activities. The conviction of Vit Barta in the bribery case in
April 2012 and feuds within the party eventually led to a split in the VV and the dissolution of the coalition by the
ODS and TOP 09. The breakup of the coalition increased the chances of early elections in June 2012 as the ODS and
TOP 09 did not have the necessary majority of 101 seats. However, a breakaway faction of Public Affairs Liberal
Democrats (LIDEM), founded by Karolina Peake, prevented the government from collapsing by providing the
necessary support with its eight MPs. The government had the support of 100 MPs from the three parties together;
Political Landscape
in addition, it also had the support of a group of independent MPs. This helped the government win an April 2012
vote of confidence by 105 to 93 votes.
The coalition faced another crisis in December 2012 when Prime Minister Petr Necas sacked Defense Minister
Karolina Peake after only eight days in office. A collapse was averted in January 2013 when the ODS and TOP 09
renegotiated their coalition agreement with LIDEM. In March 2013, former Prime Minister Milos Zeman was sworn
in as the country’s first directly elected president.
In June 2013, an organized crime unit seized cash worth US$8m, tranches of documents and gold from eight civil
servants and politicians in a raid. The espionage and corruption scandal, which also involved the then Prime Minister
Petr Necas’s chief of staff Jana Nagyova, led the opposition and other politicians to demand the prime minister’s
resignation. After his resignation on June 17, 2013, the opposition CSSD demanded the dissolution of the Chamber of
Deputies and an early election. The three coalition partners argued that it was still possible for them to muster a
majority and despite written support from 101 MPs, President Zeman appointed a caretaker government with Jiri
Rusnok as prime minister. The caretaker government, nevertheless, needed to win a confidence vote, failing which
the president promised to give the ODS-led coalition a second chance to form the government. The caretaker
government lost the vote of confidence in August 2013; however, the ODS-led coalition supported snap polls instead
of taking a second shot at forming the government, citing that it was not possible for them to obtain the necessary
support of 101 MPs. On August 20, 2013, a vote on dissolution of parliament was conducted with a call for new
elections within two months. The dissolution motion was passed with a 140–7 majority in the parliament. The
president gave his assent for the same on August 28, 2013, and called for the snap polls to be held on October 25–
26, 2013.
The snap parliamentary elections held in October 2013 did not produce clear winners, with as many as seven parties
managing to cross the 5% threshold required for representation in the Chamber of Deputies. The traditionally
dominant parties, CSSD and ODS, recorded their worst-ever election results since the Czech Republic’s
independence. While the left-wing CSSD emerged as the largest party in the elections, the ODS fared dismally. Major
gains in the elections were made by a newly formed anti-corruption party, ANO 2011 – founded by billionaire
businessman Andrej Babis in 2011 – which won 47 seats in the 200-member Chamber of Deputies. In January 2014,
CSSD, ANO 2011 and KDU–CSL formed a coalition government.
In the legislative elections held in October 2017, 200 Chamber of Deputies members were elected and Andres Babis
of ANO 2011 became the prime minister of the Czech Republic. However, Babis is facing intense protests over the
allegations of receiving EU subsidies fraudulently by the companies where Babis has direct interests. As of June 2019,
amidst an EU audit report and the Czech Police’s recommendation that Babis be indicted on possible counts of
frauds, Babis reiterated his innocence and refused demands for his resignation. With the mounting conflict, the
political landscape in the Czech Republic is expected to remain intense during the second half of 2019.

Political Landscape
Figure 19: The Czech Republic – Key Political Events
• After the end of World War II in 1945, the former Czechoslovakia was reestablished as an
independent state.
• In the 1946 elections, the communists became the largest party with 36% of the popular
1945-1967 votes and formed a coalition government.
• The communists staged a coup d’état and Czechoslovakia became a communist country in
1948.
• Czechoslovakia enjoyed gradual liberalization under the reformist general secretary of the
Czechoslovak Communist Party, Alexander Debcek, in the 1960s.
• The period of reform was crushed by the Soviet invasion in August 1968.
• In 1969, the reformist Dubcek was replaced by the orthodox Gustav Husak and
Czechoslovakia stayed a communist country under the Soviet influence.
1968-1992 • The communist government reigned in November 1989 after a week of demonstration
known as the Velvet Revolution.
• In 1989, the popular Vaclav Havel was elected president of the republic.
• Czechoslovakia was split into the Czech Republic and Slovak Republic in 1992, which was
called the Velvet Divorce.
• Vaclav Havel was elected president and Vaclav Klaus carried on as the prime minister
following the Velvet Divorce in 1993.
• The Klaus government resigned in 1997 with increasing public disapproval over the
economic reform program.
1993-2005 • Havel was reelected as president in 1998.
• Former prime minister Vaclav Klaus was elected as president. He succeeded Vaclav Havel
in 2003.
• The Czech Republic was one of 10 nations to join the EU in 2004.
• Stanislav Gross resigned as the premier following allegations of corruption in 2005.
• Following a hung assembly in 2006, President Klaus appointed Mirek Topolanek as the
prime minister.
• The Czech Republic joined the EU's Schengen Treaty free movement zone in 2007.
• Topolanek lost a parliamentary vote of confidence and resigned in March 2009.
2006-2010 • Jan Fischer formed the interim government in May 2009 to run the country until June
2010.
• In May 2010, the CSSD won the most votes in the general elections, but not enough to
form a government.
• In March 2013, Prime Minister Milos Zeman was sworn as the country’s first elected
president.
• In June 2013, Petr Necas resigned as prime minister amid a bribery and spying scandal and
Jiri Rusnok was appointed prime minister of the caretaker government.
2011 • In August 2013, the new government lost a vote of no confidence and early elections were
onwards called by the parliament.
• In the October 2013 elections, the CSSD and newly formed ANO 2011 emerged as the two
largest parties.
• In January 2014, the CSSD and ANO 2011, along with the KDU-CSL, formed a coalition
government.
• In the legislative elections in October 2017, ANO 2011 emerged as the winner and Andres
Babis became the prime minister of the Czech Republic.
\

Political Landscape
4.3. Structure and policies
4.3.1. Key political figures
Key political figures in the Czech Republic are:
 Head of the state: President Milos Zeman
 Head of the government: Prime Minister Andrej Babis
Figure 20: The Czech Republic – Key Political Figures
Milos Zeman has been the president of the Czech Republic since 2013. He was a
member of the CSSD until 2007; however, conflicts with the party leader Jiri
Paroubek led Zeman to leave the party and establish his own party, the Party of Civil
Rights, in 2009. In the January 2013 presidential elections, which were mandated by
a constitutional amendment in August 2012, he became the Republic's first ever
directly elected president. He previously served as the chairman of the Chamber of
the Deputies during 1996–1998 and as the prime minister during 1998–2002. He is
considered to be a Euro federalist and is an advocate of closer European integration.
Andrej Babis is the Czech Republic's 12th prime minister and was elected in
December 2017. He was the Finance Minister from January 2014 to May 2017. He
also served as the First Deputy Prime Minister during the same period Babis initiated
a number of policies during his tenure as the Finance Minister, including the
electronic registration of sales and VAT control statements for companies. He also
founded the political party called ANO 2011 in 2012 and has served as its leader since
formation. Before joining politics, he was known as an entrepreneur. He is also
considered to be the second richest person by net worth in the Czech Republic.
SOURCE: MarketLine ©MARKETLINE
4.3.2. Structure of government
The Czech Republic is a multi-party parliamentary democracy with a bicameral parliament. The parliament has two
chambers: the Chamber of Deputies and the Senate. The supreme law of the Czech Republic is its constitution, which
was ratified by the Czech National Assembly in December 1992. The president of the Czech Republic is the official
head of state, while the prime minister is the head of government.
4.3.3. Center/federal
The country’s legislative power is vested in a bicameral parliament. The Chamber of Deputies is the lower house and
has 200 members elected for four years. The Chamber of Deputies (at first the Czech National Council) has the

Political Landscape
powers and responsibilities of the now defunct federal parliament of the former Czechoslovakia. To enter the
Chamber of Deputies, a party must win at least 5% of the votes.
The Senate is the upper house and has 81 members elected for six years, with a third of the senators being replaced
every two years by a majority voting system. Although the president is just a figurehead, he holds some important
legal powers, which include the appointment of the prime minister and members of the government, appointing
members of the CNB board, and signing or vetoing legal acts passed by parliament.
4.3.4. Key political parties
CSSD
The Czech Social Democratic Party (Česká strana sociálně demokratická,[CSSD]) is one of the oldest social democratic
parties in Europe – it traces its roots back to 1872. The Communist Party of Czechoslovakia (Komunistická strana
Československa [KSC]) absorbed it into its new manifestation after the coup in 1948. After the 1989 Velvet
Revolution, the revival of the party was difficult due to a strong anti-communist feeling in Czech society. Reforms
undertaken by the party convinced its traditional supporters, including public sector employees and industrial
workers, to come back into the fold. Chairman Milos Zeman made CSSD the most popular party in the 1998 and 2002
elections. With the continuation of the economic recession in 1999, many of the party’s supporters shifted their
loyalties to the Communist Party of Bohemia and Moravia (Komunistická strana Čech a Moravy [KSCM]).
Furthermore, Zeman faced opposition from a section of his own party, which led to his retirement.
Zeman was succeeded by Vladimir Spidla, who led the party to a convincing victory over the ODS in June 2002.
However, the CSSD’s defeat in the European Parliament elections in June 2004 led to his resignation. Stanislav Gross,
who was a very popular politician in the country, succeeded him. Nevertheless, he was not successful in revitalizing
the party, as the influence of Zeman continued to loom large. Zeman’s supporters advocated the formation of
another minority CSSD government with parliamentary support from the KSCM after both the 2002 and 2006
general elections. Despite pressure from left-wing members of the party, the leadership refused to buckle and repeal
the 1995 resolution that prohibits participation in a coalition with the KSCM. The party was in opposition until the
2013 snap elections, where it emerged as the largest party with 20.5% of the popular vote and 50 seats in the
Chamber of Deputies. In the 2017 legislative elections, the party lost 35 seats from the previous elections and now
holds 15 seats.
ANO 2011
Founded by billionaire Andrej Babis in 2011 as an anti-corruption movement, ANO 2011 is a center-right party. In its
debut in the 2013 polls, ANO 2011 surprisingly emerged as the second largest party with 18.7% of the vote and 47
seats in the Chamber of Deputies. The party emerged as the winner of the 2017 legislative elections, receiving 29.7%
of the total votes and 78 seats.
ODS
The Civic Democratic Party (Občanská demokratická strana [ODS]) has traditionally been the most influential center-
right force in Czech politics since the country’s transition to democracy. The current leader of the party is Miroslava
Nemcova. The party first gained prominence in 1991 on the might of its charming co-founder Vaclav Klaus who was
also the country’s first post-democracy prime minister. The party’s main ideology comprises economic liberalism
(support for a free market economy with limited government intervention). The ODS also maintains a skeptical policy
concerning Europe and is opposed to the revival of the draft EU constitutional treaty. However, the majority of its
supporters favor a pro-EU policy.
Initially, the party's vote bank comprised of the young and educated urban population, budding entrepreneurs and
small-businessmen. However, the party proved incapable of capitalizing on this support and began to lose course
after the completion of mass privatization in 1994. Cracks began to appear in the party due to the economic
consequences of policy shortcomings and Klaus’s refusal to acknowledge his critics, which irked party members.
Political Landscape
Unity within the party weakened further after the 1996 general elections. Subsequently, the ODS was hit by a major
challenge in 1997 when its government collapsed due to large-scale defections as corrupt party financing practices
came to light.
Vaclav Klaus remained the leader after this challenge; however, he resigned after the party lost in the 2002 elections
to seek candidacy for the 2003 presidential elections. This time, the party was united in its support of Klaus’s bid to
become the president of the country in 2003, which he went on to win. Meanwhile, Mirek Topolanek succeeded
Klaus as the party’s chairman in November 2002, a position which he held until March 2010. The change of
leadership led the party to post its best performance in 2006 elections, which saw the ODS win 35.4% of the votes
and 81 seats in the Chamber of Deputies. The party’s strong performance in the 2006 elections strengthened Mirek
Topolanek's position. He was elected president of the party for the third time in November 2006 but resigned and
was succeeded by Petr Necas in 2010. In the elections held for the Chamber of Deputies in May 2010, the ODS won
52 seats. However, owing to a bribery scandal concerning several high-ranking officials in the prime minister’s office,
the party was marginalized in the October 2013 elections. It managed to attract just 7.7% of the popular vote and 16
seats in the Chamber of Deputies. The ODS emerged as the second largest party in the 2017 legislative elections with
an 11.3% vote share. It holds 25 seats in the Chamber of Deputies.
KSCM
The Communist Party of Bohemia and Moravia (Komunistická strana Čech a Moravy [KSCM]) is the successor of the
KSC, which ruled the country from 1948 to 1989. The KSCM continues to oppose market-oriented reforms and
integration with the West. Its main policies include withdrawal from the North Atlantic Treaty Organization (NATO),
increasing subsidies and the renationalization of strategic enterprises. In the elections held for the Chamber of
Deputies in May 2010, the KSCM won 26 seats. The party registered an improved performance in the 2013 elections,
winning 33 seats in the lower house and 14.9% of the popular vote. The share of votes received by the party went
down to 7.8% of the total votes in the legislative elections in 2017, from 14.9% of votes in the 2013 elections. The
party holds 15 seats in the Chamber of Deputies.
Other parties
TOP 09, Mayors and Independents (Starostové a nezávislí [STAN]), the Czech Pirate Party (Česká pirátská strana
[Pirates]), the Christian and Democratic Union – Czechoslovak People's Party (Křesťanská a demokratická unie –
Československá strana lidová [KDU–CSL]) and Freedom and Direct Democracy (Svoboda a přímá demokracie [SPD])
are the other major parties that managed to cross the 5% threshold required to enter parliament in the 2017
elections.

Political Landscape
4.3.5. Composition of government
Figure 21: Composition of Chamber of Deputies, October 2017
The Christian and Mayors and

Democratic Union – TOP 09, 7 Independents, 6
Czechoslovak
People's Party, 10
The Communist Party

of Bohemia and
Moravia, 15
ANO, 78
The Czech Social
Democratic Party, 15
Freedom and Direct

Democracy, 22
The Czech Pirate The Civic Democratic

Party, 22 Party, 25
Source: The CIA World Factbook ©MARKETLINE
4.3.6. Key policies
Economic and social

In December 2013, the emerging government comprising the CSSD, ANO 2011 and KDU-CSL announced a coalition
agreement. The coalition partners came to an agreement on contentious issues, such as tax policies, pension, and
healthcare reforms. In the 2017 budget, the government has announced a generous budget owing to the elections in
October 2017. The 2017 budget targeted a deficit of CZK60bn (US$2.57bn) while promising wage hikes for civil
servants, teachers, nurses, and doctors. The 2018 budget proposed a CZK10bn (US$460.2m) lower deficit compared
to 2017. The 2019 budget proposed a deficit of CZK40bn (US$1.78bn), indicating a budget deficit of 0.7% in 2019.
The 2019 budget proposed a rise in pensions as well as public sector wages. It also introduced a free inter-city travel
scheme for pensioners and students. The overall 2019 state expenditure is expected to be around CZK1.51tn
(US$66.91bn) while the revenues are projected to be CZK1.47tn (US$65.13bn).

Political Landscape
Foreign
After the 1989 Velvet Revolution overthrew the communist regime, the Czech Republic joined the Council of Europe
in 1990, the OECD in 1995, NATO in 1999 and the EU in 2004. Some of the country's initiatives include its
contribution to the NATO-led Kosovo force and the EU force in Bosnia. Furthermore, a Czech field hospital had been
deployed at Kabul Airport in Afghanistan, and in March 2008, the Czech Republic took responsibility for the
provincial reconstruction team in the province of Logar in Eastern Afghanistan. The last 59 members of the team
returned home in February 2013.
The country aims to uphold the safeguarding of human rights as its highest ideal when dealing with other countries.
The government wants to strengthen its transatlantic relations as an ideological and security-related strategy. It
plans its foreign policy to be in tune with the situation in the Middle East, energy security in Europe and human
rights across the world. In March 2011, it decided not to involve its military in the Libyan conflict, in agreement with
the resolution passed by the United Nations Security Council that looked at the Arab League's active involvement in
finding a solution to the conflict. The country’s policies are expected to remain mostly pro-EU in the medium term.
However, there are also increasing voices and resistance from various Czech political parties against the European
Commission norms related to fiscal discipline requirements, as well as its migration policies.
4.4. Performance
4.4.1. Governance indicators
The World Bank report on governance used voice and accountability, political stability and absence of violence,
government effectiveness, regulatory quality, rule of law and control of corruption as indicators for 214 countries
and territories over 1996–2017. Daniel Kaufmann of Brookings Institution, Massimo Mastruzzi of the World Bank
Institute and Aart Kraay of the World Bank Development Economics Research Group conducted the study. For any
country, a percentile score of zero corresponds to the lowest possible rank and a percentile score of 100 corresponds
to the highest possible rank.
According to the World Bank's governance indicators for 2017, the Czech Republic scored in the 76.85 percentile on
the voice and accountability parameter. This measures the extent to which a country's citizens are able to participate
in selecting their government, as well as freedom of expression, freedom of association and freedom of the media.
The country has gained reputation as one of the most stable democracies in the former Soviet bloc. It was placed
slightly higher than its neighbor the Slovak Republic, which scored 75.86.
The Czech Republic scored in the 84.29 percentile on the political stability and absence of violence indicator. This
measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional
or violent means, including domestic violence and terrorism. The country’s score on this indicator was slightly higher
than that of the Slovak Republic’s 76.19 percentile.
In terms of government effectiveness, the Czech Republic scored in the 81.25 percentile, which was higher than the
Slovak Republic's 75.00 percentile. This parameter measures the quality of public and civil services and the degree of
governmental independence from political pressures, the quality of policy formulation and implementation and the
credibility of the government's commitment to such policies.

Political Landscape
The Czech Republic’s score for regulatory quality was in the 86.06 percentile. This measures the ability of the
government to formulate and implement sound policies and regulations that permit and promote private sector
development. The country’s score was higher than that of the Slovak Republic's 76.44 percentile.
The Czech Republic scored in the 83.65 percentile on the rule of law indicator. This measures the extent to which
agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement,
the police and the courts, as well as the likelihood of crime and violence. In comparison, the Slovak Republic was
placed much lower with a score of 71.63.
The Czech Republic’s score on the control of corruption indicator was in the 70.67 percentile. Corruption remains a
problem in the country and includes bribe-taking by municipal officials, financial irregularities in state-owned
companies and procurement irregularities in ministries. The Slovak Republic scored in the 62.50 percentile.
4.5. Outlook
Following the October 2017 elections, ANO 2011 emerged as the leading party, securing the highest share of votes.
Andrej Babis of ANO 2011 became the prime minister of the Czech Republic as a result. The country’s foreign policy
is expected to remain aligned towards the EU in general, despite the central bank continuing its unwillingness to join
the Eurozone banking union, as well as conflict over EU migration policies. The intensifying protests against the
incumbent administration, over EU subsidy fraud allegations, are threatening the present government’s ability to last
its full term.

Economic Landscape
5. Economic Landscape
5.1. Summary
The Czech economy performed relatively well during the 1990s, driven by rapid economic reform initiatives. A short
recession in 1997–1998 led to a sustained increase in unemployment and caused a degree of financial sector
distress. Except for this short recession, the economy recorded strong growth throughout the 1990s. This trend
continued during 2002–2008, when the economy grew at a strong average growth rate of 4.55%. However, the
global economic slowdown led the country’s GDP growth to contract by 4.80% in 2009. The Czech economy was
severely impacted by the global downturn, prompting the ODS-led government to shift to a policy of fiscal
consolidation to augment public finances and improve the business environment. The government also embarked
upon healthcare and pension reforms to ensure long-term fiscal sustainability. The economy grew by 2.27% in 2010
and by 1.78% in 2011. However, the export-led recovery of 2010–2011 subsided in 2012 and the economy
contracted by 0.80%. The recession continued in 2013 as the economy contracted by 0.48%. Due to strong external
demand for its exports and the rise in domestic demand, the economy grew by 2.72% in 2014. In 2015 and 2016, the
economy grew by 5.31% and 2.45%, respectively. Owing to the robust domestic consumption demand and
investments, 2017 witnessed a higher economic growth of 4.35%. Amidst increasing per unit labor costs and
declining export competitiveness, the economy managed to witness 2.89% growth in 2018, becoming one of the
fastest growing economies in the EU region. According to MarketLine, the economic growth rate is expected to
remain around an average of 2.6% over 2019–2023.
5.2. Evolution
5.2.1. 1945–1990
The former Czechoslovakian economy was not damaged by World War II. Industry was the largest sector of the
economy, and the country had large entities in both light and heavy industry. During the war, the German occupying
forces took complete control over the major industrial plants; however, they were eventually taken over by the
Czechoslovakian government after the war. Foreign trade was in private hands and agriculture remained a family
occupation. This changed with the Czechoslovak Communist Party taking control of the country in February 1948.
The government nationalized all sectors of the economy, with centralized planning forming the cornerstone. The first
five-year plan (1949–1953) focused on expanding the producer goods sector.
The second five-year plan (1956–1960) witnessed high investments, an increase in real wages and a 6.9% growth in
national income. However, these investments were yielding diminishing returns. The third five-year plan (1961–
1965) was abandoned after the recession in 1962 and the national economy then declined between 1963 and 1965.
The cancellation of orders from China due to the Soviet-China dispute, unrealistic goals and adverse weather
conditions led to the poor economic situation.
Czechoslovakia faced major problems with regards to energy and trade in the 1970s, which slowed down its
economic growth. At the beginning of the 1980s, the country faced serious problems, such as obsolete factories and
equipment, and a stagnant resource base. In 1981 and 1982, personal consumption declined and the cost of living
increased more rapidly than wages. This prompted the government to introduce a set of reforms known as the "Set
of Measures to Improve the System of Planned National Economic Management after 1980." The reforms did not
involve the dismantling of central control, but permitted greater freedom of action for managers of enterprises in

Economic Landscape
selected operational areas. These reforms gave managers more authority over their own investment activities.
However, they did not improve the efficiency of the economy.
5.2.2. 1991 onwards
Driven by rapid economic reform initiatives, the Czech economy performed relatively well during the 1990s. The
economic resurgence began taking shape in 1991 following the IMF’s shock therapy labeled the "big bang". Steady
liberalization and judicious economic management practices led to the elimination of 95% of price controls, and
fostered an environment of low unemployment, a solid balance of payments position, a steady exchange rate, a shift
of exports from the former USSR to Western Europe, and a relatively low external debt. Inflation, however, was on
the higher side – mostly around 10% until 1998 – and the government ran modest budget deficits.
In order to shift its focus from the former communist economic blocs to the West, the government overhauled the
legal and administrative structure governing investment, revamped existing banking and telecommunications
facilities, and harmonized commercial laws and practices to Western standards. The government also sought to
minimize its reliance on Western European partners for foreign investment, particularly its powerful neighbor
Germany, by attracting investments from the US and other developed economies. The US was the third-largest
foreign investor in the Czech economy during 1990–1998, behind Germany and the Netherlands, accounting for a
12.9% share of total FDI during this period.
During the 1990s, the government privatized most of its state-owned heavy industries through a voucher
privatization system, which involved share-transfers of state-owned enterprises to citizens of the country. The
government had already completed the privatization of real estate in 1992 by restituting land to their former
owners. Under the voucher system, the government gave the citizens an opportunity to buy a book of vouchers that
represented potential shares in a state-owned company at a reasonable price. This was in contrast to Russian
privatization, which constituted sales of state-owned assets to private companies. The effect of this policy was
remarkable. By 1998, more than 80% of enterprises were in private hands, compared to the 97% control the state
held on the assets under communist rule.
A recession in 1997–1998 led to a sustained increase in unemployment and caused a degree of financial sector
distress. It also exposed challenges faced by the government in the restructuring of industrial enterprises and its
failure to develop efficient capital markets. A bulging current account deficit, which had reached 8% of GDP in 1996,
could not be financed by capital inflows, which led to a balance of payments deficit and eventually culminated in the
free flotation of the previously pegged koruna. In order to stimulate the economy, the government introduced two
austerity packages in 1997, established a restructuring agency in 1999 and launched a revitalization program to
encourage the sale of firms to foreign companies. Although the economy contracted by 0.59% in 1997 and 0.33% in
1998, it returned to growth in 1999. Economic growth improved from 1.43% in 1999 to 4.27% in 2000, buoyed by
strong export growth.
The trend of strong economic growth that began in 2003 continued until 2007, during which the economy recorded
an average growth of 5.5%. However, the global economic slowdown brought the country’s GDP growth down to
2.68% in 2008, which was followed by a contraction of 4.80% in 2009. The economy grew by 2.27% in 2010 and by
1.78% in 2011. However, the export-led recovery of 2010–2011 subsided in 2012 and the economy contracted by
0.80%. The recession continued in 2013 as the economy contracted by 0.48%. Due to strong external demand for its
exports and the rise in domestic demand, the economy grew by 2.72% in 2014. The economy posted strong growth
of 5.3% in 2015, followed by 2.45% growth recorded in 2016. Robust domestic consumption and investment
expenditures helped to increase GDP growth 4.35% in 2017. Owing to the global slowdown, especially amongst the
country’s major trade partners, the growth rate declined to 2.89% in 2018. The economy is expected to register
stable growth in 2019, witnessing 2.9% growth.

Economic Landscape
Figure 22: Historical GDP Growth of the Czech Republic, 2007–2018
8.0
6.0
4.0
Growth Rate (%)
2.0
0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-2.0
-4.0
-6.0
Year
SOURCE: Country Statistics, MarketLine ©MARKETLINE
5.3.1. Financial authorities and regulators
The primary objective of the Czech National Bank (CNB) is to maintain price stability by creating a low inflation
environment. The bank also has the mandate to create conditions for sustainable economic growth. The CNB sets
monetary policy, issues banknotes and coins, and manages the circulation of currency, the payment system and
settlements between banks. It also supervises the banking sector, the capital market, the insurance industry, pension
funds, credit unions and electronic money institutions, and the foreign exchange. As a central bank, the CNB
provides banking services to the state and the public sector.

Economic Landscape
5.3.2. Stock exchange
The Prague Stock Exchange (PSE) is the biggest securities market in the Czech Republic. It is a joint stock company
and is based on the membership principle. Only PSE members are licensed securities dealers and have access to its
system. In May 2004, the PSE became a full member of the Federation of European Securities Exchanges. The US
Securities and Exchange Commission, in May 2004, officially granted it the status of a "designated offshore securities
market" and have included it on a list of offshore exchanges that are reliable for investors. According to the PSE,
total market capitalization stood at US$974.89bn as of June 11, 2019.
5.4. Performance
5.4.1. GDP and growth rate
Increasing net exports, private consumption and gross capital formation provided a boost to economic growth
during 2003–2008. Although the economic fundamentals of the Czech economy remained sound, its sensitiveness to
external demand from Western Europe, particularly Germany, led to a contraction of 4.80% in 2009. Due to a revival
in economic conditions and a global recovery, as well as the government’s fiscal consolidation measures, the
economy posted moderate growth of 2.27% in 2010 and 1.78% in 2011. However, the export-led recovery of 2010–
2011 subsided in 2012 and the economy contracted by 0.80%. In 2013, the economy remained in recession. In 2014,
the economy posted a growth of 2.72%. The economy posted a strong growth of 5.31% in 2015, followed by 2.45%
growth recorded in 2016. According to MarketLine, the economic growth rate accelerated to 4.35% in 2017, only to
decline to 2.89% in 2018. The economy is expected to witness 2.9% growth in 2019 and an average of 2.52% growth
over 2020–2023.

Economic Landscape
Figure 23: Nominal GDP and Real GDP Growth Rate in the Czech Republic (US$ Billion/%), 2013–2023f
350.0 6.0
300.0 5.0
250.0 4.0
Growth Rate (%)

US$ Bn
200.0 3.0
150.0 2.0
100.0 1.0
50.0 0.0
0.0 -1.0
2013 2014 2015 2016 2017 2018 2019f 2020f 2021f 2022f 2023f
Year
GDP (Current Prices) Real GDP Growth Rate

Economic Landscape
5.4.2. GDP composition by sector
The largest segment in the country is the services sector, with its output constituting 61.61% of GDP in 2018,
according to MarketLine. In the same year, the industrial sector constituted 36.22% of GDP and the agricultural
sector constituted 2.17% of GDP. The country has a well-developed automotive sector. Moreover, the manufacturing
industry’s share of the country’s GDP is one of the highest among all the EU countries. The tourism industry also
plays a central role in the country’s economy.
Figure 24: GDP Composition by Sector, 2018
Agriculture, 2.17%
Industry, 36.22%
Services, 61.61%

Economic Landscape
Agriculture
The main agricultural products produced in the Czech Republic include wheat, potatoes, sugar beets, hops and fruits.
During 2013–2018, agricultural output grew by an average annual rate of 1.49%. The sector is expected to witness
2.94% growth during 2019, according to MarketLine.
Figure 25: Agricultural Output of the Czech Republic (CZK Billion/%), 2013–2018
108.0 10.0
106.0 8.0
6.0
104.0
Growth Rate (%)

4.0
102.0
CZK Bn
2.0
100.0
0.0
98.0
-2.0
96.0 -4.0
94.0 -6.0
2013 2014 2015 2016 2017 2018
Year
Agriculture Output Growth Rate
Note: local currency reported due to US dollar fluctuations and their impact on growth figures.

Economic Landscape
Industry
The major sub-sectors of the industrial sector are metallurgy, machinery and equipment, motor vehicles, glass and
armaments. The country’s automotive segment makes the country a major destination for FDI. According to
MarketLine, industrial output growth averaged 4.33% during 2013–2018. The industrial sector in the Czech Republic
is expected to grow at 4.34% in 2019.
Figure 26: Industrial Output of Czech Republic (CZK Trillion/%), 2013–2018
2.0 12.0
1.8
10.0
1.6
1.4 8.0
1.2
6.0
CZK Tn
Growth Rate (%)

1.0
4.0
0.8
0.6 2.0
0.4
0.0
0.2
0.0 -2.0
2013 2014 2015 2016 2017 2018
Year
Industry Output Growth Rate

Economic Landscape
Services
The Czech services sector is relatively underdeveloped compared to many other countries in the region.
Nevertheless, the sector accounts for the bulk of the country’s employment. The services sector grew at an average
annual rate of 4.96% during 2013–2018. The services segment is expected to witness 5.31% growth in 2019,
according to MarketLine.
Figure 27: Services Output of Czech Republic (CZK Trillion/%), 2013–2018
3.5 8.0
3.0 7.0
6.0
2.5
5.0
Growth Rate (%)

2.0
CZK Tn
4.0
1.5
3.0
1.0
2.0
0.5 1.0
0.0 0.0
2013 2014 2015 2016 2017 2018
Year
Services Output Growth Rate
5.4.3. Fiscal position
According to the IMF, the Czech Republic posted an average annual general government surplus of 1.5% of GDP
during 2017–2018, witnessing an increase from 0.7% surplus in 2016. The general government surplus is forecast to
remain around an annual average of 0.74% of GDP over 2019–2023.

Economic Landscape
5.4.4. Exports and imports
According to the International Trade Centre, the Czech Republic’s major export partners were Germany (32.2%),
Slovakia (7.5%), Poland (6%), France (5.1%), the UK (4.7%) and Austria (4.4%) in 2018. Major import partners in 2018
were Germany (28.7%), Poland (9%), China (8.5%), Slovakia (5.9%), the Netherlands (5.2%) and Italy (4%). According
to MarketLine, exports increased to US$232.48bn in 2018 from US$209.17bn in 2017, while imports went up to
US$208.51bn from US$182.12bn during the same period.
Figure 28: External Trade of Czech Republic, 2014-2018
500.0
440.98
450.0
394.30
376.60
349.75
400.0
341.68
350.0
300.0
232.48
US$ Bn
208.51
209.17
200.07
250.0
185.12
186.91
180.69
176.52
162.83
160.98
200.0
150.0
100.0
50.0
0.0
2014 2015 2016 2017 2018
Year
Exports Imports Total trade
5.4.5. Current account position
According to the IMF, the current account surplus stood at 1.6% of GDP in 2016, rising sharply from 0.2% of GDP in
2015. However, it declined to 1.1% of GDP in 2017 and further to 0.2% of GDP in 2018. It is forecast to post a deficit
of 0.6% of GDP in 2019.

Economic Landscape
5.4.6. External debt
According to the CIA World Factbook, external debt stood at US$205.2bn at the end of 2017, up from US$138.0bn in
2016.
5.4.7. International investment position
Foreign direct and portfolio investments

According to the United Nations Conference on Trade and Development World Investment Report 2019, the country
received FDI worth US$9.52bn in 2017, which declined slightly to US$9.48bn in 2018. Total FDI stock stood at around
US$155.02bn in 2018, compared to US$155.99bn in 2017.
Credit rating
Standard & Poor’s (S&P) raised the country’s sovereign credit ratings in August 2011. The long-term foreign currency
rating was raised two levels from A to AA- and the ratings remained unchanged until June 2019. In April 2018,
Moody’s retained the country’s A1 ratings, but changed the outlook from stable to positive. In August 2018, Fitch
affirmed the country’s credit rating at AA-, but with a stable outlook.
5.4.8. Monetary situation
Overview
Inflation
During the period from 2014 to 2016, the inflation rate of the Czech economy remained below 1%. In 2017, the
inflation rate rose to 2.45% . The inflation rate, which stood at a five year high in 2017, was primarily attributed to
the higher prices of goods and services. In 2018, however, it declined slightly to 2.19%. Owing to fluctuating oil
prices, higher government social spending and strong import demand trends, inflation is expected to increase to
2.36% in 2019.

Economic Landscape
Figure 29: CPI and CPI-based Inflation in the Czech Republic, 2013–2023f
130.0 3.0
125.0
2.5
120.0
2.0
Consumer Price Index
115.0
Percentage (%)
1.5
110.0
1.0
105.0
0.5
100.0
95.0 0.0
2013 2014 2015 2016 2017 2018 2019f 2020f 2021f 2022f 2023f
Year
Consumer Price Index Inflation

Economic Landscape
5.4.9. Employment
According to MarketLine, the unemployment rate stood at 3.19% in 2018, up from 2.9% in 2017. This is expected to
marginally rise to 3.32% in 2019.
Figure 30: Unemployment in the Czech Republic (Millions/%), 2013–2023f
0.40 8.00
0.35 7.00
0.30 6.00
Unemployment (Millions)
Unemployment Rate (%)

0.25 5.00
0.20 4.00
0.15 3.00
0.10 2.00
0.05 1.00
0.00 0.00
2013 2014 2015 2016 2017 2018 2019f 2020f 2021f 2022f 2023f
Year
Total Unemployment Rate of Unemployment (%)
5.5. Outlook
The Czech Republic’s economic fundamentals remain sound despite the slowdown in growth in 2018. However,
continuing budget deficits are potentially damaging to the economy’s health, especially considering the country’s
rising inflation due to higher wages, subsidies and public spending. The resilience of the banking system adds an
additional strength to the economy as banks are adequately capitalized to endure severe economic stress. The Czech
Republic has always been a favored manufacturing base for European nations. However, with the wage rise and
paucity in skilled labor, its competitiveness in terms of manufacturing could be adversely impacted in the medium-
term. Overall, the economic outlook remains positive as the economy has recovered well on the back of external and
internal demand. GDP is expected to rise by 2.9% in 2019, driven by strong domestic consumption demand, which
will be supported by higher wages.

Social Landscape
6. Social Landscape
6.1. Summary
Like most other European countries, an aging population, a high literacy rate and a universal healthcare system
characterize the Czech Republic’s social landscape. The healthcare system, primarily governed by the Ministry of
Health, has shown an improvement in recent years. The health insurance system is compulsory and covers all the
country’s permanent residents.
6.2. Evolution
The former Czechoslovakia had a comprehensive and universal system of social security in the 1980s, under which
everyone was entitled to free medical care and medicine. Factory and local healthcare centers, first aid stations and
a variety of medical clinics supplemented hospitals and other inpatient institutions. The ratio of physicians to
inhabitants improved from one per 745 in 1954 to one per 278 in 1985, although there was a shortage of doctors in
rural areas. Spas are also an integral part of the healthcare system in Czechoslovakia. Many spas have been in
existence for centuries, such as Bardejov (since the 13th century) in Slovakia and Karlovy Vary (Karlsbad) in the Czech
Republic.
With the breakup of Czechoslovakia, the Czech Republic was formed in 1993. The social security system in the Czech
Republic comprises three levels: state social subsidy, social assistance and social insurance – the latter represents the
core of the system. The state social subsidy consists of benefits and allowances such as childcare allowances, birth
grants and death grants. The social assistance axis is a complementary social safety net system, targeted principally
at people in need, along with charities and other non-state institutions. All permanent or long-term residents in the
Czech Republic are entitled to social assistance when their income does not ensure a decent standard of living. The
state social subsidy and social assistance schemes are administered at the regional level by local bodies of the state
administration. All permanent or long-term residents of the Czech Republic are entitled to state social subsidy
benefits, of which entitlement to child allowances, social benefits, transport and housing benefits are income
assessed.

Composition by age and gender
People aged 15–64 years constituted 65.38% of the population in 2018. The number of people aged 65 and above
accounted for 19.42% of the population. This segment is highly dependent on the social security system. The country
had 96.92 males per 100 females in 2018, according to MarketLine.

Social Landscape
Table 9: Mid-Year Population by Age (as a Percentage of the Total Population), 2018e
Age Female Male

0–4 4.59 5.01
5–9 5.14 5.6
10–14 4.83 5.27
15–19 4.23 4.64
20–24 4.68 5.15
25–29 6.16 6.74
30–34 6.58 7.34
35–39 7.27 8.06
40–44 8.55 9.28
45–49 6.97 7.54
50–54 6.38 6.78
55–59 5.75 5.87
60–64 6.58 6.26
65–69 6.75 5.95
70–74 6.02 4.81
75–79 4.05 2.88
80+ 5.47 2.82
Source: Country Statistics, MarketLine ©MARKETLINE
6.3.1. Religious composition
According to the CIA World Factbook, in the 2011 census, Roman Catholics constituted around 10.4% of the Czech
population, Protestants 1.1% and others and unspecified 54%. Around 34.5% of the population followed no religion.
6.3.2. Education
The Czech education system goes back to 1774, when compulsory school attendance was established. Elementary
education is compulsory and takes nine years, usually from the age of six to 15. Elementary school is divided into two
stages: a five-year primary and a four-year lower secondary stage. Children also have an option of applying to six- to
eight-year gymnasiums (schools targeted towards a specific study area) after they finish their fifth or seventh year of
elementary education.
Pupils who have fulfilled the nine-year compulsory school attendance requirement can apply for study at an upper
secondary school, although it is not mandatory. The time-frame of upper secondary education is generally four
years. However, most of the students pursuing secondary education prefer to opt for vocational education over
general secondary education. To pursue the former, a student can leave secondary school after completing two to
three years of study, which is followed by a report on a final exam and a vocational certificate stating their
professional capability. This entitles the student to secondary education with a vocational certificate. The majority of
students prefer to go to the eight year-gymnasium over upper secondary school, which lasts until their 13th year of
education.

Social Landscape
The students who complete secondary education with a leaving examination can pursue tertiary education. Tertiary
education includes advanced vocational and university education. Most universities have Bachelor's and Master's
degrees lasting for three and two years, respectively. Higher education at public and state universities is free.
However, after age 26, an individual is no longer eligible for student status under state social services and thus will
not receive student benefits, including health insurance.
6.3.3. Healthcare
Healthcare policy in the Czech Republic is the responsibility of the Ministry of Health. The health insurance system is
compulsory and covers all people who permanently reside in the country. The financing of the healthcare scheme is
entrusted to semi-public administrative bodies, and citizens can choose the health insurance body by which they
would like to be insured. In practice, the General Health Insurance Company (Všeobecna Zdravotní Pojištovna [VZP]),
which has 190 branches across the country, insures the largest proportion of the country’s citizens. Contributions to
the social insurance scheme, comprising sickness and maternity benefits, old age, invalidity and survivor’s pensions,
unemployment benefits and employment programs, are set as a percentage of the gross salary.

Social Landscape
6.4. Performance
6.4.1. Healthcare
Healthcare services in the Czech Republic are well developed. According to MarketLine, total healthcare expenditure
was 7.15% of GDP in 2017, up from 6.98% in 2011.
Figure 31: Expenditure on Healthcare, 2008–2017
16.5 9.0
16.0 8.0
15.5 7.0
15.0 6.0
Percentage (%)
14.5 5.0
US$ Bn
14.0 4.0
13.5 3.0
13.0 2.0
12.5 1.0
12.0 0.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
Total Healthcare Expenditure Total Healthcare Expenditure as a % of GDP
6.4.2. Income distribution
On the Gini coefficient of equalized disposable income, which ranges from zero (perfect equality) to 100 (perfect
inequality), the country scored 24.0 in 2018, according to Eurostat. The country has reduced its income inequality
considerably over the past ten years, where in 2009, the score stood at 25.1 out of 100. The Czech Republic has one
of the lowest Gini coefficient scores in Europe as of 2018.

Social Landscape
6.4.3. Education
According to MarketLine, public education expenditure was 5.77% of GDP in 2016, up from 5.06% in 2011. The Czech
Republic has an adult literacy rate of around 99%, with an almost equal male and female literacy rate.
Figure 32: Public Expenditure on Education, 2007–2016
14.0 7.00
12.0 6.00
10.0 5.00
8.0 4.00
Percentage (%)
US$ Bn
6.0 3.00
4.0 2.00
2.0 1.00
0.0 0.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
Public Expenditure on Education Public Expenditure as a % of GDP
6.5. Outlook
The incumbent government is undertaking various social reform measures, including pension reforms, an earlier
retirement age mandate, subsidies for the elderly and students, and public wage reforms aligned to inflation indices.
These measures will boost domestic consumption demand; however, it will also burden government finances. In
addition, like most Western European countries, the Czech Republic will witness challenges due to a declining birth
rate and an aging society, leading to increasing pensions and a drop in government revenues due to a loss in taxes.
The opposition to the European Commission’s liberal migrant policies by the Czech political parties is also reflective
of the general view of the masses.

Technological Landscape
7. Technological Landscape
7.1. Summary
The Czech Republic is considered to be the “Detroit” of Europe due to the presence of large automotive companies
and the sector’s success in attracting large investments. R&D has gained more importance in the Czech Republic in
recent years, as witnessed by the progress seen in its GERD intensity over the past decade. Despite this, the country
continues to remain a moderate innovator on the European Commission’s ‘European Innovation Scoreboard 2018’.
7.2. Evolution
Czechoslovakia benefitted from inheriting vast industrial assets following the breakup of the Austro-Hungarian
Empire after World War I. Industrialization continued in the inter-war years and the country gained a good
reputation before World War II in terms of armaments and heavy industry. In the late 1940s, Czechoslovakia was one
of the most industrialized countries in the world, with defense and heavy industry receiving increased investment
under the Communist regime and the industrial sector growing rapidly until the 1970s. During the 1970s,
Czechoslovakia had a commitment with other Comecon members to specific long-term obligations to supply
products, such as machine tools and railroad locomotives. Machinery, electrical engineering, metalworking,
chemicals, asbestos, rubber and ferrous metallurgy, including ore extraction, contributed the most (in terms of
monetary value) to the industry in 1985.
The general approach to IT in the Czech Republic is described in the State Information Policy, approved by
Government Resolution No. 525 of May 31, 1999. The document sets objectives and priorities for the building of the
information society in the Czech Republic. The state information policy was constituted to address eight priority
areas: information literacy, information democracy, the development of public administration information systems,
the reliability and security of information systems and personal data protection, communication infrastructure,
electronic commerce, a transparent economic environment and a “stable and safe” information society.
The Action Plan of the State Information Policy, approved by the Government Resolution No. 527 on May 31, 2000,
contained the concrete measures necessary for building the information society. The projects underlined in the
document were divided into three framework programs: information literacy, electronic commerce and electronic
public administration (e-government). At the European Union Summit in Gothenburg, Sweden in June 2001, the
Czech Republic joined the common eEurope+ Action Plan, with an objective to accelerate reforms in order to
modernize the economy by making it a digital and an information-oriented society.
The first step taken by the Czech government towards establishing the National Innovation Policy (NIP) was adopting
the National Innovation Strategy in March 2004. In July 2005, the government adopted the NIP, which was
implemented by a number of bodies within the state administration. The R&D Council was assigned the role of
coordinating body for the NIP by a government resolution that was adopted in October 2005. In 2011, the National
Innovation Strategy of the Czech Republic was adopted, with priorities to boost the country’s research climate and
entrepreneurial activities and reduce the gap between business entities and research institutions. As a continuation
of its national policy on innovation, the government adopted an updated ‘National Research, Development and
Innovation Policy of the Czech Republic 2016–2020’ in 2016, with an increasing focus on strengthening links between
innovation and economic activities.

7.3.1. R&D
The main player in terms of RDI policymaking is the Council for Research, Development and Innovation (CRDI), an
expert and advisory body chaired by the prime minister, which plays the central role in the formulation and
coordination of policies. At the implementation level, the Ministry of Education, Youth and Sports (MEYS) and the
MIT are the two main ministries dealing with RDI issues. While MEYS is the central administrative authority for
academic research, MIT is responsible for industrial research and innovation. There are five other ministries
possessing their own RDI budget, but their influence on overall RDI policies is minimal. In addition, the TACR provides
competitive funding for applied research, while the Czech Science Foundation (GACR) is the main funding agency for
basic research. The major public research organization in the country is the Academy of Sciences of Czech Republic
(ASCR).
7.3.2. Intellectual property
There were no laws for the protection of private property until 1989 when the Communist regime was overthrown.
The government succeeding the Communist regime brought in legislation to protect patents and industrial designs
and models (the Law on Patents, Industrial Models and Process Innovations – Law 527/1990). The legislation that
protects trademarks was implemented in 1988 (Law 174/1988) and tightened in 1990. The law that provides for the
registration and protection of marks that differentiate the goods or services of one producer from those of another
that are not already registered as trademarks in the Czech Republic was adopted at the end of 1995 (Law
1371/1995). This law gives foreign trademarks the same rights and obligations as Czech trademarks to the extent
that the foreign trademark’s country provides the same protection to Czech trademarks. Furthermore, this law was
amended again during the first half of 2000 to extend copyright protection from 50 to 70 years.
In late 2002, the government approved an amendment to the anti-piracy law that gives customs officers the
authority to provide information on distributors or forgers of video and audio cassettes and compact discs to those
entities that were harmed by piracy. The law gives copyright owners a more effective tool to fight counterfeiters in
civil disputes. The Czech Republic also became a party to the European Patent Convention from July 1, 2002.
Therefore, in their European patent applications, firms can designate the Czech Republic as a country where the
European patent should be effective. Amendments to the Consumer Protection Act and the Trade Inspection Act
have also given the Czech Trade Inspection Bureau greater authority to fight copyright and trademark infringement.
In August 2010, the government announced that the amended Copyright Act would fully comply with the European
copyright law and the international copyright law. The government made the amendments to provide a licensing
system for anonymous, unpublished and hidden works in libraries or museums. It also pushed the new act to bring
about greater transparency of collective rights management by tightening the criteria while awarding rights, and by
simplifying and specifying regulations regarding calculating the remuneration for the reproduction of copyrighted
material and excluding remuneration for reproducing non-copyrighted material.
7.4. Performance
7.4.1. Telecommunications and Internet
The Czech Republic has one of the most well-developed telecom markets in Europe. The penetration rate for mobile
subscriptions stood at 137.04 per 100 people in 2018. The country had 14.53 million mobile subscriptions at the end
of 2018 and is expected to rise to 14.66 million subscribers by 2023. The number of internet users in the country also
grew at a rapid pace. In 2011, only 65.45% of the population had access to internet; this figure increased to 80.38%
in 2018. The number of internet users at the end of 2018 totaled 8.52 million.
Figure 33: Internet Users and Penetration, 2013–2018e
8.8 82.0
8.6 80.0
8.4
78.0
8.2
Internet Users in Millions
76.0
8.0
Percentage (%)
74.0
7.8
72.0
7.6
70.0
7.4
68.0
7.2
7.0 66.0
6.8 64.0
2013 2014 2015 2016 2017 2018e
Year
Number of Users Percentage of Population
7.4.2. Intellectual property
The country has done well compared to the other CEE countries in terms of the number of patents granted by the US
Patent and Trademark Office (USPTO); however, it lags considerably behind its neighboring nations, such as Germany
and Austria. At the same time, the number of patents acquired by the Czech Republic has risen over the past five
years, which is a positive sign for the economy.

Table 10: Patents Granted by the USPTO, 2013–2018
2013 2014 2015 2016 2017 2018

Slovakia 14 26 25 26 42 40
Estonia 43 38 37 51 29 44
Slovenia 43 50 40 65 57 77
Poland 113 172 201 265 281 291
The Czech 176 196 197 219 264 350
Republic
Austria 1,136 1,296 1,248 1,416 1,613 1,528
France 6,555 7,144 7,034 6,907 7,365 6,988
The UK 6,551 7,232 7,143 7,289 7,633 7,552
Germany 16,605 17,926 17,485 17,568 17,998 17,433
The US 147,666 161,675 154,399 160,457 167,367 161,970
Source: USPTO ©MARKETLINE
7.5. Outlook
The government has an encouraging innovation policy in place to improve the infrastructural support for the
establishment of innovation clusters and incubating startups. The Czech Republic also provides generous incentives
to foster R&D activities. However, the country also lags behind in terms of the effective implementation of the
policies which are place. A slowdown in the country’s FDI flows needs to be addressed in a productive manner
through additional policy reforms. The country also needs to focus on improving its high technology exports through
diversification and through strengthening its technological landscape.

Legal Landscape
8. Legal Landscape
8.1. Summary
The judiciary in the Czech Republic is separated from the executive and legislative branches and functions
independently in its jurisdiction. The supervisory bodies for both banking and insurance were unified and placed
under the authority of the Czech National Bank (CNB) in 2005. The Czech Republic is ranked as the 23rd freest
economy in the world by the ‘2019 Index of Economic Freedom’, published by the Heritage Foundation and the Wall
Street Journal. It is placed 13th out of 44 countries in Europe. The country’s overall score was much higher than the
regional average. Labor regulations are relatively flexible and labor management relations are generally cordial.
However, there are also increasing concerns over the effectiveness of judicial activities and the reliance on police
services. The incumbent Justice Minister Marie Benesova has also proposed the need to reform the existing four-tier
system of courts to a three-tier system of courts to improve the efficiency and management of legal resources.
8.2. Evolution
The Czech Republic was affected by favoritism in the 1990s, which was addressed to a certain degree by
strengthening the regulatory framework. Regulatory institutions were strengthened and the activities of the financial
markets were closely supervised. As well as this, supervisory bodies for both banking and insurance were unified and
placed under the authority of the CNB in 2005. Finally, conflict of interest legislation was introduced in January 2007,
which places most categories of public officials under public scrutiny. Most public officials are subject to annual
property and income declarations, which make it difficult for dishonest and corrupt officials to dodge punishment.
8.3.1. Structure of the judicial system
The judiciary in the Czech Republic is independent from the executive and legislative branches and is impartial in its
application of the law. The judiciary was completely restructured under the 1992 constitution. It includes the
Supreme Court (a supreme administrative court); high, regional and district courts; and a constitutional court. The
Supreme Court is the highest appellate court. Created in 1993, the constitutional court rules on the constitutionality
of legislation. Currently, the nation has 86 district courts, eight regional courts, two high courts and two supreme
courts.
8.3.2. Taxation
Individual income tax

The general personal income tax rate is 15%. However, a special solidarity contribution is levied at 7% if income from
employment and entrepreneurship exceeds CZK1.57m (US$69,778.77) as of 2019.

Legal Landscape
Corporate tax
Corporate income tax is levied on a resident company’s worldwide profit. As of 2019, the corporate tax rate is 19%
and a reduced rate of 5% applied to income from investment funds and 0% on income from pension funds.
Withholding tax
Dividends, interest and royalties paid to non-residents are subject to a 15% withholding tax unless exempted under a
tax treaty. However, a 35% rate is levied on income paid to a tax haven.
VAT
After the Czech Republic's accession to the EU, its VAT system was modified to conform to the European system. The
standard VAT rate is 21%, while a reduced rate of 0%, 10% and 15% applies to select goods and services, as of 2019.
8.4. Performance
8.4.1. Effectiveness of the legal system
In the World Bank’s Doing Business 2019 report, the country was ranked 115th in the starting a business category,
even after the government reduced the minimum capital requirement and the paid-in minimum capital requirement.
The number of procedures required to start a business is eight, compared to the OECD high income average of 4.9,
which indicates that there is further scope for easing the country’s procedural burdens. The government needs to
step up reform measures to address these issues; in addition, it must make the legal system free of cumbersome
regulations that may hamper business operations.
8.5. Outlook
The country’s administration has been trying to bring about many changes to the legal structure to plug loopholes
and to increase transparency within the regulatory framework. However, the tardy enforcement of laws has been a
challenge. The lack of transparency in state administration has been a challenge, and concrete efforts are needed to
make it transparent and effective. In addition, the lack of clarity on fiscal reforms and conflicts with the EU regarding
policies, including financial discipline, could lead to unnecessary chaos and uncertainties in terms of nurturing a firm
business climate.

Environmental Landscape
9. Environmental Landscape
9.1. Summary
The Czech Republic has incorporated most of the EU’s environmental laws into its regulatory framework. The
country witnessed massive environmental degradation during the Communist era, which was characterized by a
complete absence of laws for the protection of the environment. The Czech Republic witnesses air and water
pollution in some areas of Northwest Bohemia and in Northern Moravia, around Ostrava. This poses potential health
risks to people in those areas. Though the nation has fair scores in terms of ecosystem vitality, the protection of
biodiversity, the sustainability of agriculture and the maintenance of its water resources, it continues to suffer in
terms tree cover loss and poor air quality, according to the Environmental Performance Index published by Yale
University. However, the ongoing government’s efforts to bring the industry up to the EU code should improve the
domestic pollution situation in the long run.
9.2. Evolution
The deterioration of the environment at the end of the 1980s was a consequence of central planning, ignoring the
principles of sustainability, evading democratic decision making processes and the complete absence of a legal and
institutional framework for the protection of the environment. The situation started improving after the
implementation of policies and regulations to control pollution in the 1990s and 2000s. The State Environmental
Policy (SEP) of 2001 was prepared for a two-year period because of the expected date of accession of the Czech
Republic to the EU. The updated SEP was then prepared, corresponding both to the EU's Sixth Community
Environment Action Programme of July 2002 and the OECD Environmental Strategy for the First Decade of the 21st
Century.
The government has embarked on a number of reforms regarding environmental sustainability. The government also
set ambitious targets according to the EU Energy and Climate Package signed in December 2008. These targets
include increasing the share of renewable energy in the transport sector to 10% and the share of renewable energy
in final energy consumption to 13% by 2020. As an initiative towards improving the air quality, the government
approved the Clean Air Act in 2012. In 2012, the government adopted the ‘State Environmental Policy of the Czech
Republic 2012–2020’ as a principal framework document to improve environmental protection activities and related
standards. The government also ratified the COP21 Paris agreement in 2017.

The State Environmental Policy (SEP) acts as a framework for the long-term development of the environment. The
significant features of the SEP 2012–2020 are:
 The protection of nature, the landscape and biological diversity.

 Sustainable use of natural resources, the protection of water, protection against floods and the
optimization of material flows and waste management.
 Reducing the damage to the environment from human activities.

 Improving environmental standards for the quality of human life.
9.4. Performance
9.4.1. Environmental impact
The ‘2018 Environmental Performance Index’ ranked the Czech Republic 33rd out of 180 countries, which is lower
compared to its neighbor Slovakia, which was ranked 28th. CO2 emissions increased to 109.8 million metric tons in
2017 from 108.9 million metric tons in 2016, indicating a 0.7% increase during the period, according to MarketLine.
Figure 34: Carbon Dioxide Emissions (Million Tons/%), 2010–2017
122.0 3.0
120.0
2.0
118.0
116.0 1.0
Percentage (%)
114.0
Tons (Million)
0.0
112.0
110.0
-1.0
108.0
106.0 -2.0
104.0
-3.0
102.0
100.0 -4.0
2010 2011 2012 2013 2014 2015 2016 2017
Year
Volume Growth Rate

9.5. Outlook
The Czech Republic has already achieved its Europe2020 target regarding renewable energy sources (RES) in the
production of electricity, way ahead of its target time frame. This outperformance indicates that the nation has
greater scope to improve its share, provided it arranges the right stimuli and policy support. However, the nation is
also one of the opponents of a binding target for 2030 regarding increasing the share of RES as a part of the Europe
2030 vision development. The country also needs to implement stringent pollution control measures, especially in
the mining sector, to improve the nation’s air quality.

Appendix
10. Appendix
10.1. ISO codes of selected countries
Country ISO code Country ISO code

Australia AUS Japan JPN
Austria AUT Korea KOR
Belgium BEL Luxembourg LUX
Canada CAN Mexico MEX
Chile CHL Netherlands NLD
Czech Republic CZE New Zealand NZL
Denmark DNK Norway NOR
Estonia EST Poland POL
Finland FIN Portugal PRT
France FRA Slovak Republic SVK
Germany DEU Slovenia SVN
Greece GRC Spain ESP
Hungary HUN Sweden SWE
Iceland ISL Switzerland CHE
Ireland IRL Turkey TUR
Israel ISR United Kingdom GBR
Italy ITA United States USA
Brazil BRA Indonesia IDN
China CHN Russian Federation RUS
India IND South Africa ZAF

Appendix
10.2. Ask the analyst

MarketLine’s Country Analysis Practice consists of a team of economists, analysts, and researchers, all with expertise in
their given fields. For any questions or comments about this report you can contact the author directly at
[email protected].
10.3. Disclaimer
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher,
MarketLine.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that
the findings, conclusions and recommendations that MarketLine delivers will be based on information gathered in good
faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such
MarketLine can accept no liability whatever for actions taken based on any information that may subsequently prove to
be incorrect


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Czech Republic

In-depth PESTLE insights

Country Profile Series

Report Code: ML00002-009

1.2.1. Key findings

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

1.2.2. PESTLE highlights

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

Table 1: Czech Republic – Key Fundamentals, 2016–2023f

2016 2017 2018e 2019f 2020f 2021f 2022f 2023f

Source: Country Statistics, MarketLine

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

2. KEY FACTS AND GEOGRAPHIC LOCATION 16

2.1. Key facts 16

2.2. Geographical location 17

3.2. Political analysis 19

3.2.3. Current challenges 20

3.3. Economic analysis 23

3.4. Social analysis 28

3.4.2. Current strengths 28

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

3.5. Technology analysis 31

3.5.3. Current Challenges 32

3.6. Legal analysis 37

3.7. Environmental analysis 40

3.7.2. Current strengths 40

3.7.5. Future risks 43

4.3. Structure and policies 48

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

5.3. Structure and policies 56

5.3.2. Stock exchange 57

5.4.3. Fiscal position 62

6.3. Structure and policies 67

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

6.4.2. Income distribution 70

7.3. Structure and policies 73

7.3.2. Intellectual property 73

8.3. Structure and policies 76

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

9.3. Structure and policies 78

10.1. ISO codes of selected countries 81

10.2. Ask the analyst 82

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

Figure 3: Corruption Perceptions Index Scores, 2018 22

Figure 6: Share of Population by Tertiary Education Attainment (%), 2017 26

Figure 9: Gross Domestic Expenditure on Research and Development (GERD) as a Percentage

Figure 16: Environmental Taxation as a Percentage of GDP, 2016 41

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

Figure 32: Public Expenditure on Education, 2007–2016 71

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

Table 3: Analysis of the Czech Republic's Political Landscape 19

Table 6: Analysis of the Czech Republic's Technology Landscape 31

PESTLE Country Analysis Report: Czech Republic ML00002-009/Published 06/2019

2. Key Facts and Geographic Location

2.1. Key facts

Table 2: The Czech Republic – Key Facts, 2019

Population (2018) 10.63 million