The Czech Republic is a medium-sized, open economy with 71 percent of its GDP based on exports, mostly from the automotive and engineering industries. According to the Czech Statistical Office, most of the country’s exports go to the European Union (EU), with 32.4 percent going to Germany alone. The United States is the Czech Republic’s second largest non-EU export destination, following the United Kingdom. While the Czech GDP dropped by 5.6 percent due to the economic impact of COVID-19 in 2020, it rebounded in 2021 to 3.3 percent according to the Czech Statistical Office. The Ministry of Finance forecasts 3.1 percent growth for 2022.
The “Bill on Screening of Foreign Investments” entered into force May 1, 2021. The law gives the government the ability to screen greenfield investments and acquisitions by non-EU investors.
The Czech Republic has taken strides to diversify its traditional investments in engineering into new fields of research and development (R&D) and innovative technologies. EU structural funding has enabled the country to open a number of world-class scientific and high-tech centers. EU member states are the largest investors in the Czech Republic.
The United States announced on February 15, 2020 plans to provide up to USD 1 billion in financing through the Development Finance Corporation (DFC) to the Three Seas Initiative Investment Fund, the dedicated investment vehicle for the Three Seas Initiative and its participating Central and Eastern European countries. The Three Seas Initiative seeks to reinforce security and economic growth in the region through the development of energy, transportation, and digital infrastructure. In December 2020 the DFC approved the first tranche of U.S. financial support for the Three Seas Initiative Investment Fund amounting to USD 300 million.
The European Bank for Reconstruction and Development (EBRD) agreed March 24, 2021, to a request from the Czech cabinet to return as an investor to the Czech Republic after a 13-year pause to help mitigate the impact of the COVID-19 pandemic on the economy. The EBRD’s investments in the Czech Republic primarily focus on private sector assistance and should reach EUR 100 – 200 million annually (USD109-218 million). The EBRD plans to be involved in investment projects in the Czech Republic temporarily (maximum five years).
The continued economic fallout from COVID-19 resulted in the Czech Republic’s highest historic state budget deficit of 419.7 billion crowns (USD 18.2 billion) in 2021. In 2021, the Czech Republic appropriated approximately USD17 billion for the COVID-19 response, including USD7.7 billion in direct support, USD 6.7 billion in healthcare and social services expenses, and USD2.3 billion in loan guarantees.
The Czech Republic has adopted environmental strategies and policies to address the climate crisis. Public procurement policies include environmental considerations, and the government provides subsidies to companies for using modern low-carbon technologies, renewables, and resource-effective processes.
There are no significant risks to doing business responsibly in areas such as labor and human rights in the Czech Republic.
The Czech Republic fully complies with EU and the Organization for Economic Cooperation and Development (OECD) standards for labor laws and equal treatment of foreign and domestic investors. Wages continue to trail those in neighboring Western European countries (Czech wages are roughly one-third of comparable German wages). While wage growth slowed in 2020 following the coronavirus pandemic, resulting in a 3.1 percent year-on-year increase, wages rose by 6.1 percent in 2021, according to the Czech Statistical Office. As of the fourth quarter of 2021, wages grew primarily in the real estate, accommodation, and hospitality sectors. As of January 2022, the unemployment rate remained the lowest in the EU, at only 2.3 percent.
|TI Corruption Perceptions Index||2021||49 of 180||http://www.transparency.org/research/cpi/overview|
|Global Innovation Index||2021||24 of 132||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2020||5,629||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2020||22,070||https://data.worldbank.org/indicator/NY.GNP.PCAP.CD|