Foreign Direct Investment

According to UNCTAD's World Investment Report 2023, FDI inflows to the Czech Republic increased to USD 9.8 billion in 2022 from USD 9 billion the year before (+8.9%). In the same period, the total stock of FDI stood at USD 202.6 billion (around 69.8% 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 (17.5%), Luxembourg (15.4%), Germany (14.5%), Austria (10.1%), France (7.1%), and Cyprus (4%). In terms of economic activity, the financial and insurance sector accounts for 27.1% of the total inward FDI stock, followed by manufacturing (26.1%), real estate (14.9%), wholesale and retail trade (8.8%), and professional, scientific and technical activities (5.6%). Concerning the geographical location of investment, the capital Prague has the highest share of stock of FDIs (more than 60%), ahead of Central Bohemia and Moravia-Silesia. Data by the OECD shows that FDI inflows to the country stood at USD 6 billion in the first semester of 2023, compared to USD 2.6 billion in 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 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 18th out of 63 in the World Competitiveness Ranking, as well as 31st among the 132 economies on the Global Innovation Index 2023 and 24th out of 184 on the 2023 Index of Economic Freedom.