The economy of the Czech Republic: basic principles, structure, incomes of the population and domestic finance

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:47

Among the former socialist countries of Eastern Europe, the Czech Republic is the second most developed after Slovenia. In recent years, the Czech Republic has been one of the most stable, successful and fastest growing in the European Union. Domestic consumption and investment remain the main driving force behind the growth of the gross domestic product. The Czech economy is briefly discussed in this article.

General information

The country is located in Central Europe, bordering Poland, Germany, Austria and Slovakia. According to the form of government, it is a parliamentary republic. The population of the Czech Republic is approximately 10.5 million people (84th in the world). The territory of the country covers an area of 78,866 sq. km, which is 0.05% of the total world territory.

In a rather close historical past, the Czech Republic was part of the Austro-Hungarian Empire. At the end of the First World War, the Czechs and Slovaks formed Czechoslovakia. On the eve of World War II, Nazi Germany occupied the territory of the modern state. After the war, she was educatedsocialist Czechoslovakia. In 1989, democratic reforms were launched, and the economy of the Czech Republic and Slovakia was again returned to market principles. In 1993, the common country was finally and peacefully divided into national republics. The Czech Republic joined NATO in 1999 and joined the European Union in 2004.

Overview of the Czech economy

The country has a prosperous market economy, with one of the highest GDP growth rates. In the first quarter of 2018, it was 4.4%. It belongs to post-industrial countries with a predominant service sector (60.8%), the second largest sector - industry occupies 36.9%. Small but technically well-equipped agriculture accounts for 2.3%.

There is a fairly low unemployment rate among the countries that are members of the EU. The structure of the Czech economy is largely dependent on exports, which makes its development highly dependent on reduced demand in the global market. The country's exports account for approximately 80% of GDP, with the main items being automobiles, industrial equipment, raw materials, fuels and chemicals.

Some indicators

The country's GDP in 2017 was $191.61 billion (48th in the world). The Czech Republic produces about 0.3% of the world's gross output. PPP per capita GDP is $33,756.77 (39th, Slovakia 41st).

A feature of the Czech economy is that, despite the fact that the country is part of the EU, it has not yet joined the Eurozone and retains itskroon currency. A flexible exchange rate helps to withstand external shocks. And the krone was considered one of the strongest currencies in the world in 2017. In terms of living standards, the Czech Republic is very close to the most economically developed countries of the European Union. The average income per person per month is approximately 10,300 crowns (approximately US$500).

Economic policy

The country's last government continued to implement some reforms aimed at reducing corruption, attracting foreign investment and improving the welfare system. All these measures should increase the revenues received by the state and improve the living conditions of the population. The Czech economy will receive additional growth incentives.

In 2016, the possibility of submitting tax reports via the Internet was introduced, which is aimed at reducing the level of tax evasion and increasing budget revenues. Further liberalization of the modern Czech economy is planned. The government will ease restrictions on the labor market to improve the business climate. Public procurement procedures will be brought in line with EU best practices.

Some issues

One of the lowest levels of unemployment in the Czech economy has led to a steady increase in the wages of the population. And the state is facing a shortage of a fairly inexpensive labor force. Businesses are seeking to force the government to lower barriers to allow for more skilled labor migration. Especially from the countries of Central Europe andUkraine. The country's basic problem is its heavy dependence on the export of industrial goods, most of which (85.2% of the total) are sold to the countries of the European Union.

Long-term challenges for the Czech economy, business in particular, include the need to diversify industrial production towards a more high-tech, service- and knowledge-based economy. As in all developed European countries, there is an urgent need to take action to reduce the rate of population aging. Despite the market transformations carried out, the country still has a backward education system, which is superimposed on a shortage of skilled workers. Serious problems are the need to finance the outdated system of pensions and he alth care.

Foreign trade

In terms of international trade, the Czech economy ranks 30th in the world. The country's share in world foreign trade is: for export - about 0.5%, for import - 0.6%. Since the industry has a significant bias towards an export-oriented orientation, its development is significantly influenced by the situation in the EU market, which is the main trading partner of the country. And above all from Germany - the largest trade and investment partner of the Czech Republic. German consumers buy $46 billion worth of Czech goods, followed by Slovakia ($11.1 billion) and the UK ($7.67 billion). The main export commodities are cars, car parts, computers and telephones.

The country's imports amounted to approximately 140 billion, the Czech Republic has a positive foreign trade balance. Most of all, the country buys goods in Germany ($37.9 billion), China ($17.3 billion) and Poland ($11.7 billion).

Financial system

The monetary unit of the Czech Republic is the kroon, 1 kroon contains 100 hellers. Since 1995, the currency has become fully convertible. Unlike most post-communist countries, the Czech Republic managed to avoid hyperinflation and a strong devaluation of the national currency. After some weakening of the Czech crown at the end of 1990, the exchange rate began to rise significantly in subsequent years, which became a significant problem for the country's export-oriented business due to the decrease in the competitiveness of products in international markets. Many experts believe that the adoption of the euro can solve this problem.

The Czech economy is a recipient of the European Union, receiving more from the single European budget than transferring to it. Many economists write that in connection with the UK's exit from the EU, the country needs to prepare to live without subsidies. They also believe that the level of savings will allow to exist at the expense of domestic financing. The population now has enough savings to become a source of investment.

People's income

In the Czech Republic, household net adjusted income after taxes per capita is $21,103 per year. This is lower than the OECD average of 30,563US dollar). There is a significant income gap in the country between the poorest segments of the population and the richest. The income of the top 20% of the population is almost four times that of the bottom 20% of the population.

The average wage in the Czech economy is about a thousand euros, which is less than half the income received in neighboring Germany and Austria. Many earn about 700-800 euros. At the same time, good engineers, chemists, programmers, surgeons receive about 2000-3000 euros per month. Salary is highly dependent on skill level, education and the size of the company. However, it should be noted that the country has rather low prices for consumer goods and low taxes, after paying which the population has enough money to meet their needs.

Services

In the post-industrial economy of the Czech Republic, the leading industry is the service sector, which employs a significant part of the able-bodied population. The industry generates up to 60.8% of GDP. The largest number of people are employed in the financial sector, telecommunications companies, tourism and retail trade. Many global corporations operate in the country, such as Tesco, Kaufland, Globus, BILLA, Ahold, which are the largest firms and largest employers. Supermarkets of these retail chains are found throughout the country.

The Czech Republic has created attractive conditions for the work of foreign IT companies. Global IT giants are attracted by good and transparent conditionstaxation, availability of qualified personnel, convenient geographical location of the country. In the Czech Republic there are large offices of Microsoft, IBM, HP, Cisco, SAP. Online retail leader Amazon has a distribution center and large warehouses here. The key employer in the industry is the Czech Post, which employs more than 30,000 people and serves more than 3,000 post offices.

Industry

The leading sector of the Czech economy is industry, which accounts for 36.9%. This is the highest figure in the European Union. The country has a well-developed engineering industry, especially the production of automobiles. In terms of production of cars per capita, it ranks second in the region after Slovakia. How automotive technology has developed here in part of Czechoslovakia since the beginning of the 20th century.

In the new century, the Czech Republic entered the top 20 countries producing more than a million cars a year. In recent decades, the industry's production volumes exceed 1.3 million (6th) in Europe. The largest share belongs to the production of passenger cars. The industry leader is the famous Skoda Auto Corporation, which also manufactures electric trains.

Metallurgical industry (production of iron and steel, metalworking) is concentrated in the areas of extraction of raw materials (black coal, calcite), mainly in the vicinity of the city of Ostrava. Iron ore is imported. The country has a developed chemical industry, pharmaceuticals and oil refining. The largest companies in the industryUnipetrol (oil refining and petrochemicals), Semtex (chemicals).

Agriculture

Small but modern agriculture produces up to 2.3% of GDP. Quite mild climatic conditions allow growing various crops. The main ones are cereals, including wheat, rye, barley, and oats. The country provides itself with its own potatoes, beets, many types of vegetables and fruits. Natural conditions make it possible to obtain good yields of various varieties of apples, pears, cherries and plums. Fruit trees generally occupy a large area of the country. They are often planted along small roads.

In South Moravia there are huge vineyards, the wines from which are popular far beyond the borders of the Czech Republic. Everyone knows the famous Czech beer, which is considered one of the best in the world. For its preparation, large areas of agricultural land are sown with hops.

The main type of animal husbandry is raising pigs, cattle and poultry. A significant amount of poultry (chickens, turkeys, ducks and geese) is grown on farms.