The Czech Republic has excelled in attracting foreign direct investment over recent years, thanks to its skilled workforce, stable business environment and sound government incentives. This has played an important role in improving the capacity and productivity of businesses, which has fed through to booming exports. The country boasts a stable banking sector, liquid capital markets and a well-developed institutional environment, underpinning its status of a regional safe haven in recent years.

We keep our clients abreast of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 22 of the Czech Republic’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you ahead of the curve, so you can operate with confidence in the Czech Republic.

Country Risk

Czech Republic Country Risk

Czech Republic Operational Risk Coverage (9)

Czech Republic Operational Risk

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Due to the low threat of domestic terrorism and the strong record of interstate capability, we consider crime to be the biggest potential risk factor in the Czech Republic. Crime rates are falling, however. The country's police force is considered to be highly capable and as such the risk from crime is relatively low, contributing to a regional outperformance in the BMI Crime and Security Index, with the Czech Republic in fourth place out of 29 Emerging Europe countries, scoring 79.1 out of 100.

The Czech Republic is a generally safe place for foreign business travellers, expatriates and tourists, and foreigners are not considered to be at a higher risk of crime than Czech citizens. The main threats to foreigners are from petty crime, especially pick-pocketing, rather than indiscriminate acts of violence. The Czech Republic also has considerably less organised crime than newer members of the EU such as Bulgaria...

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Czech Republic Crime & Security

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BMI View: The Czech Republic is a generally safe place for foreign business travellers, expatriates, and tourists, and foreigners are not at higher risk of crime than Czech citizens. The main threats to foreigners are from petty crime, especially pickpocketing, rather than indiscriminate acts of violence. The Czech Republic also has considerably less organised crime than newer members of the EU such as Bulgaria and Romania. This contributes to a regional outperformance in the BMI Crime and Security Index, in fourth place out of 30 Emerging Europe countries, with a score of 79.1 out of 100.

The risk of a terrorist attack occurring in the Czech Republic is low. The biggest threats emerge from organised crime and far-right neo-Nazi groups. Traditionally, the country's homogenous population meant that there were no aggrieved groups with reason to mobilise against the government. However, an...

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Czech Republic Labour Market

Czech Republic Logistics

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The Czech Republic's land-locked status means that supply chains are reliant on road and rail networks, meeting the majority of the country's supply chain needs as the Czech Republic's main trading partners are within the Schengen zone and in most cases just over the border. As a result, we award the Czech Republic a score of 61.8 out of 100 in the Logistics Risk Index, placing it sixth in the Emerging Europe region out of 30 states and 35 th in the world out of 140 states.

Supply chains in the Czech Republic are reliant on the road and rail networks for trade. The country offers good transport links with neighbouring states which benefits supply chains as Germany, Slovakia, and Poland account for its top three trading partners. In addition, access to EU funds has improved the quality of the transport network since the Czech accession in 2003, and projects to boost connectivity will continue in the medium term. In particular, the...

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Czech Republic Trade & Investment

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The Czech Republic faces few trade and investment risks due to its relatively open economy and harmonization of EU regulations. However, investors are exposed to increased risks and costs due to systemic corruption and poor contract enforceability. These risks are partially mitigated by favourable tax rates and attractive financial incentives. Overall, The Czech Republic places sixth in the region, with a score of 70.8 out of 100 in the BMI Trade and Investment Risk Index, between Slovenia and Latvia. The country is also competitive at the global level, in 33rd place out of 170 countries, just below Barbados.

The Czech Republic is a relatively open country for economic activity due to its market-oriented economy and tariff-free trade access across the European Union. Moreover the government offers generous financial incentives for foreign investors in the shape of tax breaks, cash grants and government assistance to...

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Czech Republic Industry Coverage (22)

Autos

Czech Republic Autos

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Passenger car sales in the Czech Republic in 2014 came in at 192,314 units, an increase of 16.7% year-on-year (y-o-y). Export-led manufacturing growth has been strong throughout the year, which has increased private consumption and the number of car purchases. Car purchases have also been boosted by the growing appetite for borrowing amongst Czech households. BMI predicts a slowdown in sales growth in 2015 due to slowing private consumption growth and higher base effects. We forecast total passenger sales to come in at 210,584 units in 2015, an increase of 12% y-o-y.

Over 2015, we forecast CV sales growth to slow to 7.0% as higher base effects from a strong 2014 weigh on growth despite expanding volumes. Commercial vehicle (CV) sales came in at 23,280 units in 2014, an increase of 9.8% with double digit growth in the light commercial vehicle (LCV) and bus segments compensating for a slower expansion in heavy truck...

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Commercial Banking

Czech Republic Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Czech Republic Consumer Electronics

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BMI View: We expect consumer electronics sales growth will accelerate in 2015, after the market narrowly returned to growth in 2014. There is however downside, with surveys of retailers indicating koruna depreciation could result in price increases in the PC and AV markets in 2015. Our core scenario is for stronger growth across all three segments in 2015, but in the event of price rises in the PC and AV markets the trend could be similar to 2014 when smartphone sales boomed, offsetting a decline in computer hardware and AV sales as koruna depreciation squeezed demand. Looking further ahead, the largest opportunities are in the mobile PC segment (tablets/hybrid notebooks), Smart-TVs and...

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Defence & Security

Czech Republic Defence & Security

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BMI View: The Czech Republic is to continue to benefit from its membership in both NATO and the EU, both in terms of the capability of its armed forces, and the breadth and capacity of its defence industry. Budgetary constraints are to keep troop levels and budgetary allocation stagnant for the foreseeable future. This in turn will result in little growth in the domestic arms market, although international sales of training aircraft continue to perform well. As part of the EU and NATO, and with a small international presence, the Czech Republic has few threats to its security, although the rise of the far-right is an issue we continue to monitor.

The Czech Republic is expected to spend up to USD2.1bn on defence in 2015, according to BMI's forecasting. The past four years has seen...

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Food & Drink

Czech Republic Food & Drink

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BMI View: Private consumption looks set to remain robust during 2015. Unemployment has fallen steadily since mid-2013 and now stands 5.8%, well below the EU average of 9.9%. In addition to this, inflation is at historical lows of a paltry 0.1%. This will continue to support private consumption as inflation is likely to remain low during 2015 and consumers will benefit from increased income available for discretionary spending due to lower energy costs.

Headline Industry Data (local currency)

  • 2015 per capita food consumption: +1.9%; compound annual growth rate (CAGR) to 2019:+3.0%

  • 2015 alcoholic drinks value sales: +2.3%; CAGR to 2019: +4.1%

  • 2015 carbonated soft drinks value sales: +3.4%; CAGR to 2019: +5.0%

  • 2015 mass grocery retail...

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Freight Transport

Czech Republic Freight Transport

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Czech Republic's freight transport sector will continue growth in 2015 in line with the country's improving economic outlook, following a year in which BMI believes saw increases in volumes across the whole sector.

Total trade is projected to maintain growth in real terms, with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 4.6% in 2015, following an estimated growth of 6.24% in 2014.

Road freight is to continue to dominate the sector and is projected to grow by 3% in 2015. BMI highlights that the EU-wide drive to decrease Europe's reliance on road freight and to diversify to greener freight transport alternatives could lead to a decline in road freight's market share. However, we expect road freight to continue to dominate the Czech Republic and Europe's freight transport sector over the medium term.

...

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Information Technology

Czech Republic Information Technology

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BMI View: we made a minor downwards revision to our IT market growth outlook in the Q2 2015 update, and we now expect a slight deceleration from 2014 as koruna depreciation and the fact that enterprise confidence is susceptible to shifts in sentiment, and a re-escalation of the eurozone crisis with the election of Syriza in Greece could undermine confidence levels. However, under our core scenario higher levels of business and consumer confidence will see demand growth, while deferred purchases from the previous period of uncertainty, particularly in enterprise software and IT services, will add to momentum. One area we expect...

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Infrastructure

Czech Republic Infrastructure

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BMI View: Our forecasts for the Czech construction and Infrastructure sector remain steady, with marginal growth of 3.7% for 2015. After several years of negative growth, investor sentiment still acts as an impediment for financing, but strong fundamentals for the sector point to a brighter picture for the longer term. Support from the EU is forecast to boost new projects from this year onwards.

Key Trends And Developments

The decline in macro-economic performance in the Czech Republic has severely affected private investment and the government's ability to fund infrastructure projects in the construction industry.

The following factors have shaped our overall bearish view for the infrastructure segment in the country:

...

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Insurance

Czech Republic Insurance

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BMI View: We expect that the Czech Republic will continue on a low growth trajectory in 2015 and for the remainder of our forecast period, up until 2019. Competitive pressures will stymie premium growth in both the life and non-life segments of the insurance sector and therefore dampen the impact of a number of positive developments in the sector, such as the recent and fairly strong increase in sales of unit-linked and single premium life insurance products.

We believe the Czech Republic insurance sector will continue to be supported by the presence of major international players, with almost all subsidiaries of major multi-national insurers adding gravitas and sophistication to the national market. These companies compete through brand, multi-channel distribution strategies, product innovation and price. Traditionally, price competition has...

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Medical Devices

Czech Republic Medical Devices

Metals

Czech Republic Metals

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BMI View:   Having enjoyed strong growth over H114, Czech steel output is now showing signs of slowing as producers find themselves facing a weakening demand scenario. Slowing economic growth in Germany and the wider eurozone region will continue to be the main challenge facing Czech steel mills during 2015 and we have our revised our production forecasts for the country downwards in reflection of this.

BMI's Q115 Czech Republic Metals Report assesses the challenges facing the country's steel sector as it battles against faltering demand in the wake of ongoing uncertainty surrounding the outlook for the eurozone economy. Czech steel production contracted by more than 9% in 2012, only to recover some of its lost growth in 2013. Accelerating output growth appeared to suggest that production was en route to expand by more than 6% over 2014; however,...

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Mining

Czech Republic Mining

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BMI View: Coal will be the primary component of the Czech Republic's mining industry over the next five years, though weak global prices will lead to stagnant growth and investment in the sector. The country also hosts the Rozna uranium mine, though it is set to close in mid-2017.

The Czech Republic will remain one of Europe's largest producers of both thermal and metallurgical coal to 2019. Slightly over half of the country's electricity generation is derived from coal-fired power plants, providing a base of support for the mining industry. However, the ratio of coal-generated electricity to total generation will fall in the coming years, leading to stagnant growth in coal output. Moreover, weak global steel...

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Oil & Gas

Czech Republic Oil & Gas

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BMI View : While there is a moratorium on shale gas exploration, the Czech Republic will remain highly dependent on imported oil and gas, mostly from Russia, as conventional hydrocarbons production potential is limited. A small increase in refinery utilisation rates will result in a modest increase in refined product import needs to answer rising domestic demand over our forecast period.

Headline Forecasts (Czech Republic 2013-2019)
Indicator 2013e 2014e 2015f...

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Petrochemicals

Czech Republic Petrochemicals

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Strong growth in Czech chemicals, plastics and rubber output has been accompanied by falling feedstock costs, leading to hope that the country's petrochemicals industry will enjoy stronger profitability in 2015, according to BMI's latest Czech Republic Petrochemicals Report.

Czech petrochemicals producer Unipetrol's saw its margins boosted by cheaper oil prices and higher operating capacity in Q414, enabling it to report a profit in the quarter and helping to slash its annual losses by three quarters. Demand for refinery and petrochemical products has picked up because of the performance of the Czech economy, which has been growing for the past four quarters.

Targeting an 11% increase in its petrochemical sales volume to 1.4mn tonnes by 2017, Unipetrol said it anticipated that the global demand for basic petrochemicals to grow by an average 3-3.5%...

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Pharmaceuticals & Healthcare

Czech Republic Pharmaceuticals & Healthcare

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BMI View: With recently implemented cost-saving measures, legislative changes, and health insurance reforms, the Czech Republic is set to recover from its recent period of stagnancy and decline. Indeed, these changes will help to provide for the growing demand for innovative drugs among the country's ageing population. The healthcare spending of the Czech population remains superior to that of the less-developed markets of Eastern and South Eastern Europe, demonstrating that demand in these regions will be even higher. In this regard, the task of meeting these demands is one that will weigh heavily on the road to recovery.

Headline Expenditure Projections

  • Pharmaceuticals: CZK73.34bn (USD3.30bn) in 2014 to CZK75.31bn (USD3.35bn) in 2014; -3.5% in local currency terms and -7.6% in US dollar terms. ...

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Power

Czech Republic Power

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BMI View: This quarter we have extended our forecast to 2024. This notwithstanding, our view on the Czech power market remains largely unvaried, while concerns over the country's energy security and carbon emissions profile move to the forefront.

The future of nuclear and renewables in the country looks increasingly uncertain as the development of sources experienced setbacks and questions about Czech energy security and its emissions profile are becoming more pronounced. With ageing domestic capacity scheduled to come offline over the coming two decades and EU regulations pressuring the country to lessen its dependence on coal, nuclear and renewables had appeared to be the preferred method to fill any future power gap. However, this is now in doubt, with the country showing inclinations to maintain an important share of coal-generated...

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Real Estate

Czech Republic Real Estate

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BMI View: A robust recovery by the Czech economy has brought some stability to the commercial real estate sector over 2014. Rental rates have stabilised as demand has begun to put downward pressure on vacancy levels. The market, which continues to be seen as one of the most established in the Central and Eastern European (CEE) region, has also benefited from slowing growth across the eurozone and increasing intensions in Russia and Ukraine, which have resulted in a steady uptick in transactional volumes in recent months.

An improving economic backdrop has helped to stabilise the commercial real estate landscape in the Czech Republic during 2014. GDP was estimated to have grown by 2.4% year-on-year (y-o-y) over the year in real terms, representing a...

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Renewables

Czech Republic Renewables

Retail

Czech Republic Retail

Telecommunications

Czech Republic Telecommunications

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BMI View: The Czech Republic telecoms market is one of the most advanced in Central and Eastern Europe, with high penetration of both voice and data services. However operators are now facing challenging conditions as price pressures threaten margins, due to market saturation; regulatory factors, such as cuts to mobile termination rates; and the impact of the eurozone crisis on macroeconomic performance acting as drags on performance. Furthermore, the market is in a period of change with the arrival of MVNOs from...

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Tourism

Czech Republic Tourism

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BMI View: On the back of a positive outlook for the broader Czech economy, outbound travel continues to grow further over the medium term (2015-2019). Meanwhile, inbound travel is likely to show subdued growth over the same period. The sector's mixed outlook is especially concerning when compared with growth forecasts for regional rival markets such as Hungary.

Following a decline of 0.35% in 2014, arrival numbers are forecast to return to growth in 2015 and beyond. However, growth rates remain subdued and we only expect to see an increase of 800,000 arrivals by 2015 compared with 2015. This represents a substantial reduction from previous forecasts and will have a negative impact on the hotel industry, which we expect to expand slightly in USD terms and contract marginally in local currency terms over the 2015-2019 period....

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Water

Czech Republic Water

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BMI V iew: The Czech Republic has a modern, extensive and relatively efficient water sector. The country's recent history has seen many developments to the sector, largely due to the high standards required for entry into the EU. Despite these improvements there is still work to be done and modernisation is ongoing, especially with regards to the infrastructure and wastewater facilities. As these changes take shape and the sector begins to see the benefits in its efficiency and reduced leakage, we forecast that the amount of water wasted by the sector will decrease while consumption levels increase.

The investment environment around the Czech water sector remains favourable. With developments to the infrastructure ongoing, openness to foreign investment and strong legislation in place opportunities are...

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