Foreign Direct Investment

According to UNCTAD's World Investment Report 2022, FDI inflows to the Czech Republic fell to USD 5.8 billion in 2021 from USD 9.4 billion the year before (-38.3%). In the same period, the total stock of FDIs stood at USD 200.5 billion (around 71% of GDP), and the country continues to rank among the largest recipients of FDI inflows into Central Europe. EU member states are the most important foreign investors in the Czech Republic: according to the latest available data by the Czech National Bank, the largest investors in the country are the Netherlands (23.5%), Luxembourg (16.8%), Germany (16%), Austria (14.9%), France (6.5%), and Cyprus (4.7%). In terms of economic activity, the financial and insurance sector accounts for 28.3% of the total inward FDI stock, followed by manufacturing (27.1%), wholesale and retail trade (12.2%), real estate (9.4%), and professional, scientific and technical activities (5.3%). Concerning the geographical location of investment, the capital Prague has the highest share of stock of FDIs (63.5%), ahead of Central Bohemia (8.3%) and Moravia-Silesia (5%). Investment projects focused on the expansion of existing companies outnumber those of newcomers (Czech Invest). Data by OECD shows that FDI inflows to the country stood at USD 3 billion in the first semester of 2022, marking a 27% increase compared to the same period one year earlier.

According to the Government Agency for Foreign Direct Investment, the Czech Republic ranks first among central and eastern European countries in terms of FDI stock and per capita inflows. This is due to the introduction of investment incentives, the presence of skilled and inexpensive labour, and the geographical advantages of the Czech Republic, such as its location in the heart of Central Europe. Since May 2021, the Czech Republic introduced a new FDI screening mechanism in line with the EU guidelines. Under the new law, any non-EU investor must obtain a permit before acquiring more than 10% of the shares or voting rights of a company operating in a sector that is sensitive to the country’s safety or its internal or public order (e.g. energy, gas, heat and water management, food and agriculture, healthcare, transportation, communication and IT systems, financial markets, emergency services and public administration, military material, etc.). Incentives are available for foreign investments that require R&D activities and that create jobs for university graduates, as well as in certain specific sectors (e.g. aerospace, information and communication technology, life sciences, nanotechnology and advanced segments of the automotive industry). The Czech Republic is ranked 27th out of 82 countries in the Economist Business Environment ranking and 26th out of 63 countries in the World Competitiveness Ranking.