Czech Republic Economy

The Czech economy has flourished since the end of Communism and particularly since its membership of the EU in 2004. It has become one of the most stable and prosperous of the former Communist states as foreign direct investment as well as export levels have increased creating a knock-on effect that has seen domestic demand increase significantly.

The overseas investment it has attracted has come following the government's programme of reforms, infrastructure development and its privatisation programme which has encompassed sectors including banking, telecommunications, and energy. Other significant FDI has come in the car-making industry such as by Volkswagen and Hyundai who have looked to take advantage of lower labour costs compared to their respective domestic markets.

The export industry has been powered by exports to the EU (representing over 85% of Czech exports), most notably Germany which in itself accounts for over one third of all exports. This concentration of export markets has made the Czech economy highly dependent on the success of its neighbours' economies. The strategy going forward is for it to focus on so-called 'priority' markets including China, Russia and the middle-east to create greater diversity. The primary exports supplied are machinery and transport equipment, followed by other commodities and industrial products.

Tourism has become a substantial source of income for the Czech economy making up over 10% of all export earnings, over 5% of GNP and employing approx 2% of teh Czech population. The tourist industry is still concentrated in certain areas however, therefore leading to regional variations in wealth. The historic capital city Prague remains the primary tourist destination and is the main point of entry into the country for tourists. Other major cities have also benefited from foreign visitors in recent years, e.g. the spa towns of Karlovy Vary and Mariánské Lázne.

The Czech tourist board is seeking to sell the country as a destination for outdoor pursuits and as a consequence, areas such as Ceský Ráj, Šumava and the Krkonoše mountains have attracted increased visitor numbers in recent years.

The last Czech government had expressed its aim to join the Euro-zone in 2010, however this has had to be postponed due to the republic's budget deficits.

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