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Economic and political overview

Economic Overview

Over the past two decades, the Czech Republic has steadily raised its living standards to match more advanced EU economies, driven by market-oriented policies, fiscal discipline, a sound financial system, and strong institutions. After stagnation, growth resumed in late 2023, with GDP rising by 1.2% annually in the first half of 2024. However, the recovery has been uneven. Consumer spending has grown, supported by rising real wages and a decrease in the household saving rate, while investment remains weak due to global trade uncertainty, tight domestic policies, and slow EU fund absorption. The IMF estimated GDP growth at 1% in 2024. As the policy mix becomes more supportive and external demand strengthens, growth is expected to accelerate to 2.4% in 2025. However, weak productivity growth and structural labour shortages will limit medium-term potential growth, estimated at around 2% (IMF).

In 2024, the budget deficit decreased to 2.2%, down from 2.6% in 2023. This improvement was driven by the expiration of measures to mitigate high energy prices, a reduction in government subsidies for renewable energy, and a continued decrease in expenditure alongside increased revenue as part of the government consolidation package. The budget deficit is projected to remain stable in 2025, shifting the fiscal stance from contractionary to neutral. Revenue growth will be supported by social security contributions and personal income taxes, as salaries are expected to outpace GDP growth. Expenditure will continue to fall as a percentage of GDP, though at a slower rate. While the growth of social benefits will slow due to reduced pension indexation, government employee compensation is expected to rise with nominal wage increases. The deficit is projected to decrease to 1.6% in 2026 (IMF). The public debt ratio remains relatively low at 43.1% of GDP in 2024; although it is 14 percentage points higher than pre-pandemic levels, it is still low compared to the EU average. The IMF forecasts a rise to 45.4% by 2026, driven by the negative headline balance, only partly offset by nominal GDP growth. After two years of double-digit inflation, HICP headline inflation is expected to slow to 2.4% in 2025 (from 2.5% in 2024) and 2% in 2026. Energy is expected to contribute negatively to inflation in 2025, with declining wholesale prices and subdued network tariff growth. HICP inflation excluding energy, food, alcohol, and tobacco is projected to remain higher than headline inflation, at 4.2% in 2024 and 3.0% in 2025 (IMF).

Despite subdued economic activity and a decline in job vacancies, the Czech labour market continues to face structural job shortages, especially among skilled workers, and labour hoarding. The unemployment rate picked up to an estimated 2.8% last year, from 2.6% in 2023, and is expected to decrease to 2.5% in 2025. While unemployment remains among the lowest in the EU, labour market pressures should ease slightly. Wage growth was projected at 6.2% in 2024 and 6.5% in 2025, before slowing to 5.6% in 2026. The IMF estimated the country’s GDP per capita (PPP) at USD 59,205 in 2024, 8.4% below the EU average.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 343.21342.99360.23377.34392.32
GDP (Constant Prices, Annual % Change) -0.11.12.32.32.1
GDP per Capita (USD) 31,63031,36633,03834,71236,202
General Government Balance (in % of GDP) -2.6-2.8-2.3-1.7-1.5
General Government Gross Debt (in % of GDP) 42.443.543.843.643.5
Inflation Rate (%) 10.72.32.02.02.0
Unemployment Rate (% of the Labour Force) 2.62.82.52.42.4
Current Account (billions USD) 1.320.271.141.081.67
Current Account (in % of GDP) 0.40.10.30.30.4

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The Czech agricultural sector went through a serious crisis in the 1990s and remains highly subsidised. Nowadays, it accounts for 1.7% of the country's GDP and employs 3% of the labour force (World Bank, latest data available). Czechia has an agricultural area of 3.5 million ha and a forest area of 2.65 million ha (FAO). The main agricultural products are sugar beet, potatoes, wheat, barley and poultry. According to the Czech Statistical Office, in 2023, the agricultural industry's output fell by 7.9%, driven by a 17.4% drop in crop production, while animal production grew by 6.3%. Cereals (41.1%) and industrial crops (24.5%) dominated crop output, while milk (54.1%), pigs (14.7%), and cattle (12.5%) led animal production. Crop production (53.3%) remained higher than animal production (39.7%). Farmers' entrepreneurial income plunged by 58.0% compared to 2022. In 2024, pigmeat and poultry meat production rose after two years of decline, while beef production fell, though farms maintained production capacity. Exports of animals for slaughter increased.

Industry accounts for 30.4% of GDP and employs 36% of the labour force. Growth in performance has been accompanied by an increase in the productivity of the labour force. The automotive sector is by far the largest industry, with companies like Skoda (owned by Volkswagen). Since 2005, foreign investors such as Toyota and PSA have also started producing cars in the Czech Republic. The Czech automotive industry now employs more than 150,000 people and accounts for more than 20% of both Czech manufacturing output and Czech exports. The Czech electronics and electrical engineering sector accounts for more than 14% of total manufacturing output, which makes it the second-largest sector in the economy (over 17,000 companies employ more than 180,000 workers in the sector). Overall, the manufacturing industry contributes 20% of GDP. The Czech Republic is shifting from a manufacturing-heavy, export-driven economy to a more mature and diversified one. Key growth sectors like non-auto manufacturing, energy, and construction have slowed down due to falling productivity, rising energy costs, and weak demand. While the auto industry has remained resilient, the shift to electric vehicles and increasing foreign competition are expected to create significant challenges in the coming years. Industrial production dropped 1.4% in 2024, mainly due to weaker demand in mechanical and plant engineering and reduced output in metal manufacturing, processing, and machining—with both production and orders declining. Construction also fell by 2.4% compared to the previous year, per Czech Statistical Office data.

Services account for 59.7% of GDP and employ nearly 62% of the active population. The tourism sector recorded a pace of sustained growth in recent years, which was partially hampered by the COVID-19 pandemic. Nevertheless, Czechia welcomed about 22.8 million tourists in 2024, exceeding pre-pandemic levels for the first time. Overnight stays rose by 2.6% to 57.3 million nights, with a 3.8% year-on-year increase in the number of accommodated tourists. According to the CSO, both guest numbers and overnight stays surpassed 2019 figures for the first time since the COVID-19 outbreak. By the end of 2023, 46 licensed banks operated in Czechia, including four large, six medium-sized, seven small banks, 24 foreign bank branches, and five building societies. The sector's total assets rose by about 11% to CZK 9,890 billion (€400 billion), roughly 130% of GDP (data European Banking Federation, latest data available). Finally, the retail sector is also growing, with sales rising by 4.6% year-on-year in 2024 (CSO).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 2.7 35.7 61.6
Value Added (in % of GDP) 1.7 30.4 59.7
Value Added (Annual % Change) -1.0 -1.9 1.8

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Czech Crown (CZK) - Average Annual Exchange Rate For 1 USD 24.4423.3821.7322.9023.21

Source: World Bank - Latest available data.

 

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Foreign Trade

The Czech Republic’s economy is very open to the outside world: according to the World Bank, external trade accounts for 133% of the GDP. The automobile industry is the backbone of trade, both for imports and exports.  Data from the CZSO show that the main exports in 2023 were motor vehicles (27.7%), machinery and equipment (11.7%), electrical equipment (10.2%), computer, electronic and optical products (8.3%), and fabricated metal products (6.0%); whereas imports were led by motor vehicles (15.1%), computer, electronic and optical products (10.7%), electrical equipment (10.6%), machinery and equipment (9.4%), chemicals and chemical products (8.0%), basic metals (7.3%)

As a medium-sized, open, export-driven economy, the Czech market is strongly dependent on foreign demand, especially from EU partners. In 2023, Germany was the Czech Republic's major trading partner, receiving 30.3% of its exports and supplying 22.9% of its imports. Slovakia was the second top destination for Czech exports (9.4%), followed by Poland (7.2%), France (5%) and Italy (4.2%). China (12.2%) was the second-largest supplier of goods and services to the Czech Republic after Germany, followed by Poland (9%), Slovakia (5.2%), and Italy (4.4%). Overall, the EU accounted for 80.2% of exports and 62.2% of imports (data CZSO).

Czechia recorded a structurally positive trade balance since entering the EU. In 2023, the country’s trade balance was estimated to be positive by 5% of GDP by the World Bank (from 0.8% one year earlier). In the same year, exports of goods totalled USD 255.4 billion (+5.5% year-on-year) whereas imports stood at USD 230.6 billion (-2.5% y-o-y). Concerning trade in services, exports increased to USD 39 billion against USD 35.2 billion in imports (+16.1% and +18.7%, respectively). According to preliminary figures from the Czech Statistical Office, in 2024, exports totalled CZK 4,568 billion, against CZK 4,434 billion in imports.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 179,039171,100211,972236,663230,599
Exports of Goods (million USD) 199,128191,911226,564242,015255,450
Imports of Services (million USD) 25,82921,62224,99629,70635,279
Exports of Services (million USD) 30,44926,06529,84933,57538,993

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 138.2128.8137.4144.0133.0
Trade Balance (million USD) 10,48212,2495,105-85913,075
Trade Balance (Including Service) (million USD) 15,66216,92310,7603,37717,295
Imports of Goods and Services (Annual % Change) 1.3-8.413.75.9-0.9
Exports of Goods and Services (Annual % Change) 1.3-8.58.25.12.7
Imports of Goods and Services (in % of GDP) 66.061.066.871.664.0
Exports of Goods and Services (in % of GDP) 72.167.870.672.469.0

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 1.75.64.54.44.4
Volume of imports of goods and services (Annual % change) 0.55.94.64.85.1

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Czech Republic is a member of the following international economic organisations: IMF, European Union, ICC, Central European Initiative (CEI), WTO, OECD, Schengen Convention, among others. For the full list of economic and other international organisations in which participates Czech Republic click here. International organisation membership of Czech Republic is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Czech Republic can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
Germany 32.8%
Slovakia 7.7%
Poland 7.3%
France 4.9%
Austria 4.2%
See More Countries 43.0%
Main Suppliers
(% of Imports)		 2023
Germany 20.9%
China 17.6%
Poland 8.0%
Slovakia 4.4%
Italy 3.9%
See More Countries 45.1%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: Petr Pavel (since 8 March 2023) - Independent
Prime Minister: Petr Fiala (since 17 December 2021) - ODS
Next Election Dates
Presidential: January 2028
Senate: September 2026
Chamber of Deputies: October 2025
Current Political Context
Petr Fiala, the prime minister and head of the liberal-conservative Civic Democratic Party (ODS), leads a coalition of five parties that rule Czechia. As a member of the Christian Democratic Union-Czechoslovak People's Party (KDU-ČSL) and Top 09 Spolu coalition, the ODS has formed alliances with the moderate Mayors Party and the leftist Pirate Party. They collectively control 108 of the Lower House's 200 seats. The far-right Freedom and Direct Democracy (SPD), with 20 seats, and the populist ANO party, led by former prime minister Andrej Babiš, hold 72 seats in the opposition. The next general election is scheduled for October 2025. Austerity and growing living expenses have caused the government's popularity to decline since 2023. ANO is making progress, but it is difficult to win a majority without the backing of the far right. With ANO receiving 26% of the vote and Spolu coming in second with a little over 22%, the ruling coalition received about 37% of the vote in the June 2024 European elections. President Petr Pavel reiterated his appeal to join the euro area in 2024, highlighting the benefits for a nation that places a high priority on international trade with the EU. It is unlikely to join in the near future, though, as the government coalition is still split on the matter.
On the external side, the Czech Republic has been actively supporting Kyiv, welcoming refugees, and offering military and humanitarian assistance since the start of Russia's invasion of Ukraine. The Czech government formally fulfilled its commitment to allocate 2% of GDP to defence in December 2024, matching NATO's baseline goal.
Main Political Parties

In Czechia, parties need at least 5% of the national vote to enter the Chamber of Deputies. Coalitions face higher thresholds: 8% for two parties and 11% for three or more. The Senate has no party threshold, as members are elected through a two-round majority system in single-member constituencies. The country's main political parties are:

Other parties include:
Executive Power
The President is the chief of state and is elected by direct public vote for a five-year term. The President has limited specific powers, the most important of which are to return enacted laws to the Parliament and to dissolve the Parliament under specific constitutionally outlined conditions. The President appoints the Prime Minister (typically the leader of the majority party or coalition in the Chamber of Deputies), as well as the Cabinet based on the recommendation of the Prime Minister. The Prime Minister is the head of the government and holds executive powers, including the right to choose governmental ministers. The Prime Minister is generally the head of the majority party or coalition in the Parliament and carries considerable political power.
Legislative Power
The legislature is bicameral. The Parliament consists of: the Senate (the upper house), its 81 members elected by popular vote to serve six-year terms (with one-third of its members elected every two years) and the Chamber of Deputies (the lower house) with its 200 members elected by popular vote to serve four-year terms. The executive branch is dependent on parliamentary support, as the government must maintain the confidence of the Chamber of Deputies to stay in power. The Prime Minister does not have the authority to dissolve Parliament; this power lies with the President, who can only dissolve the Chamber of Deputies under specific constitutionally defined circumstances.
 

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