|
Population, total (millions)
|
10.2
|
|
GDP (current US$) (billions)
|
122.35
|
|
GDP growth (annual %)
|
6.0
|
|
GNI per capita, Atlas method (current US$)
|
10710
|
|
Inflation, consumer prices (annual %)
|
1.8
|
|
Foreign direct investment, net inflows (% of GDP)
|
4.1
|
|
Unemployment, total (% of total labor force)
|
8.3
|
|
Time required to start a business (days)
|
40
|
|
Internet users (per 1,000 people)
|
470
|
|
Source: World Development Indicators (2006)
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|
Economic Summary
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The Czech Republic is classified as a high income country. The country has one of the highest income levels among the new member states of the European Union (EU). With the country's accession to the EU in May 2004, the economy’s transition from centrally planned to market driven was complete. This has set the stage for further convergence with EU income levels. Recent economic developments have been favorable, with a strong recovery in growth, significant fiscal consolidation, low inflation, and strong balance of payments. Inflows of foreign direct investment (FDI), among the highest in the region at around 9 percent of GDP in 2005, have contributed significantly to the economy’s strength. The stock of FDI in the country amounts to around 50 percent of GDP.
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The Czech Republic gained independence in 1993 following the breakup of Czechoslovakia. Until 1996 it was perceived as the most successful transition economy in Central and Eastern Europe as it achieved economic transformation with minimal unemployment and no hyperinflation. At the end of 1995, macroeconomic policy was well supported by important structural reforms, including the liberalization of wages, prices, and foreign trade. By 1996, the private sector’s share of GDP was 74 percent, the highest in the region. The “Czech miracle,” however, came to a halt in May 1997. At that time, a speculative attack on the Czech currency “koruna” forced authorities to abandon the exchange rate policy regime maintained since 1991 and introduce a strict austerity program. Growth, characterized by considerable FDI inflows, resumed in 2000 following significant and costly financial and enterprise reforms. Between 2002 and 2005, annual GDP growth rose from almost 2 percent to 6 percent, fueled by the expansion of export-driven manufacturing production, backed by foreign direct investment.
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Real GDP growth exceeded 6 percent in 2005, driven mainly by very strong net exports, coming largely on the back of foreign direct investment in the automotive sector. In the first quarter of 2006, output expansion accelerated further to a record 7.4 percent year on year.
