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.
Czech Republic Country Risk
Economic growth in the Czech Republic will stay strong in the coming years and amount to 2.6% in 2016 and 2.4% in 2017.
The largest contributor to GDP growth will continue be private consumption (1.4 percentage points in 2016). Strong wage growth will continue to underpin private consumption's share of the economy.
We are forecasting the budget deficit will stay under 2.0% of GDP in 2016 and 2017 and overall government debt will fall below 45.0% of GDP in the coming years.
The Czech Republic's trade surplus will stabilise at over 6.0% of GDP in 2016 and the country's current account will stay relatively balanced in the years ahead.
Stronger inflation will return to the Czech Republic in 2017, for when we forecast price growth to...
Czech Republic Operational Risk Coverage (9)
Czech Republic Operational Risk
Czech Republic Operational Risk
BMI View: The Czech Republic's extensive and high-quality transport network is one of the key benefits presented to potential investors, who are assured of a range of cross-border connections and accessibility throughout the country. This is somewhat offset, however, by the high cost of electricity and fuel which will impact on power heavy industries and businesses reliant upon road freight. There are also delays caused by inefficient bureaucratic practises which impacts upon import and export lead times. As such, the country is ranked eighth overall on the BMI Logistics Risk Index, with a score of 60.5 out of 100.
Industry in the Czech Republic stands to benefit from the country's well diversified...
Czech Republic Crime & Security
Czech Republic Crime & Security
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...
Czech Republic Labour Market
Czech Republic Labour Market
Czech Republic Logistics
Czech Republic Logistics
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...
Czech Republic Trade & Investment
Czech Republic Trade & Investment
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...
Czech Republic Industry Coverage (22)
Czech Republic Autos
BMI View: Consumers remain in a sweet spot of rising real wages, low interest rates, improving employment rates and low household indebtedness, which will continue to encourage car market growth.
|Passenger Car And Light Commercial Vehicle Sales|
|f = BMI forecast. Source: Automotive Industry Association, BMI|
|* CVs gaining from growing corporate car fleet spending...|
Czech Republic Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Czech Republic Consumer Electronics
BMI View: The Czech Republic is the most affluent market in Central and Eastern Europe and this is reflected in high device spending per capita. Koruna depreciation hit device sales value in 2015 in US dollar terms, but we envisage a move to a stronger growth trajectory over the medium term to be enabled by household purchasing power gains. Alongside the potential easing of price sensitivity offered by koruna appreciation, product cycles are expected become more favourable in the PC and AV segments - though this upside is partially offset by the expected cooling of the smartphone market as saturation
Latest Updates & Industry Developments
Defence & Security
Czech Republic Defence & Security
BMI View: We expect the Czech Republic's defence budget to start increasing again in absolute terms in the next five years. This is in large part a result of the healthy growth the country has been experiencing since the beginning of 2015. It will be driven in the coming years by the increasing threat represented by Russia in the region, and the Czech government's desire to be able to respond to the security and defence challenges of the region in accordance with its membership with EU and NATO. As such, defence spending will in turn increase the number of procurements as well as investment in the domestic defence sector, thus expanding opportunities for both international and national companies operating in the defence sector.
The Czech Republic's defence budget has severely suffered, since 2008, from the global financial crisis. In steep decline between 2009 and 2010,...
Food & Drink
Czech Republic Food & Drink
BMI View: The Czech Republic's food and drink industry will see robust growth on the back of rising disposable incomes. We expect the emergence of premiumisation across the board-as household incomes continue to grow, we expect demand for higher value products to rise. However, industry sales growth will be less pronounced due to a significant proportion of consumers that will remain price-conscious throughout this period.
|Food and Drink Spending|
|f = BMI forecast. Source: BMI, national statistics|
Czech Republic Freight Transport
BMI View: The Czech economy continues to perform well in 2016, benefiting the freight sector over the medium term. We forecast further economic growth in general over the medium term, albeit with a slower GDP growth. We expect GDP to grow on average 2.98% over our forecast period. The good performance of the Czech Republic is due to foreign investment and capital made possible by an affordable and skilled workforce.
We expect a continued economic recovery in the Czech Republic, with GDP growth of 4% in 2016, while slowly decreasing over the next few years until the end of our forecast period when we estimate the growth rate will be 2.3%. Foreign investment will benefit the country and in terms of trade, imports...
Czech Republic Freight Transport
BMI View: A combination of relatively strong domestic demand and recovering European economies (of which many are key trade partners) will set the Czech Republic's freight modes in good stead over both the short and medium term. Low levels of unemployment and inflation in the Czech Republic means that domestic consumers have decent spending power, increasing demand for goods transported via road, while the healthy manufacturing sector will support activity levels for both the rail and road freight modes. Meanwhile, a focus on the manufacture of more valuable goods, such as electronics, gives a positive outlook for air freight.
Latest Updates And Forecasts
We forecast rising trade volumes in the Czech Republic over the medium term forecast period with growth rates set to average 4.7%...
Czech Republic Information Technology
BMI View: We expect relatively strong growth in Czech IT spending over the medium term, with a CAGR of 5.6% forecast for 2016-2020 to CZK99.6bn. The market will be even more lucrative in US dollar terms due to koruna appreciation, though this could be a squeeze on the large electronics export industry and the growth of the software development industry. Meanwhile, for domestic spending, a strengthening currency is positive for economic confidence and household purchasing power that will support retail PC volume growth, as well as upside...
Czech Republic Infrastructure
BMI View : The Czech construction industry is anticipated to expand 2.9% y-o-y in 2016, the same growth rate compared to 2015. This year, the main growth drivers are expected to be the energy and transport sectors. The latter through the rail and roads sub-sectors, which are still enjoying EU-driven investment. The residential building industry will be another bright spot in 2016 as robust Czech economy and high household disposable income increase housing demand.
Latest Updates And Structural Trends
Compared to the challenging global economic environment, the economy of Czech Republic remains robust, mainly due to high private consumption and there are signs for higher private consumption growth in...
Czech Republic Insurance
BMI View: Though well developed, the Czech insurance market is less mature than most in the EU and there is significant room for expansion in smaller lines such as health and personal accident insurance. These factors, combined with a benevolent outlook for economic growth and consumer spending should present an opportunity for investors and new entrants over the next few years as the economy outperforms many of those in the region. The fact that both the life and non-life markets are relatively fragmented presents a further opportunity and we expect to see consolidation in both sectors as larger firms acquire some of the smaller players. The rising capitalisation demands for EU insurers should incentivise both the established indigenous firms as well as European multinationals looking to grow their footprint in the Central and Eastern Europe (CEE) region.
Czech Republic Medical Devices
BMI Industry View: We expect the Czech Republic to be the fastest growing medical device market in Central and Eastern Europe (CEE) over the 2014-2019 period, driven by strong economic performance and increases in health expenditure. The Czech Republic is heavily reliant on imported medical devices, although domestically manufactured products are of an increasingly good quality and remain competitive in terms of price.
Czech Republic Mining
BMI View: The Czech mining sector is set to consolidate further over the next few years due to the gradual winding down of the country's hard coal mining operations in the east of the country. The country's online functioning uranium mine is also scheduled for closure in 2017. We note potential expansion in the thermal coal sector, as the commodity remains an important source of domestic energy generation; however, increasing pressure on the government to comply with EU emissions regulations leaves us to question whether this is a viable long-term strategy.
Oil & Gas
Czech Republic Oil & Gas
BMI View: The Czech Republic will remain highly dependent on imported oil and gas, mostly from Russia, as conventional hydrocarbons production potential is limited. However the country will manage to slowly diversify its gas sources through the STORK II project linking the country to Poland. This will provide it with access to Polish gas and imported LNG from the Swinoujscie LNG terminal.
Czech Republic Petrochemicals
The Czech petrochemicals industry has been hit by the closure of Unipetrol's cracker in Litvinov due to fire damage in August 2015. The plant is due to come back into full operational capacity in Q416, which will ensure that basic chemical supply in 2016 will be poor and will reduce domestic polymer availability.
In 2015, rubber and plastic products output rose 9.8%, but chemicals products output slumped 5.7%. Low naphtha costs have improved the competitiveness of the sector and boosted polyolefins margins, while higher sales volumes - particularly in the polypropylene (PP) segment - have been led by a manufacturing surge. Export-led industries have stimulated petrochemicals consumption.
Acquisition activity has been mooted by producers as the industry moves towards consolidation, more integration along the value chain and adding value to output. With fertiliser production suffering losses in recent years,...
Pharmaceuticals & Healthcare
Czech Republic Pharmaceuticals & Healthcare
BMI View: The Czech Republic will continue to be one of the most attractive markets in the CEE region for pharmaceutical and healthcare investment. A strong economic outlook will be the driving factor behind growth and with plans to further increase access to healthcare, pharmaceutical sales are expected to increase over the coming years.
Headline Expenditure Projections
Pharmaceuticals: CZK78.83bn (USD3.02bn) in 2015 to CZK81.15bn (USD3.28bn) in 2016; +3.0 % in local currency terms and +8.7 % in US dollar terms. Forecasts in line with last quarter.
Healthcare: CZK312.52bn (...
Czech Republic Power
BMI View: This quarter our view on the Czech power market remains largely unchanged, 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...
Czech Republic Real Estate
BMI View : A strong economic outlook will support the Czech commercial real estate sector over the medium term. Demand for high quality space should remain high across all three real estate sub-sectors that we cover. New construction activity is mainly confined to the office and industrial sectors, although most industrial space in the pipeline is either pre-leased or built-to-suit. We expect to see rental growth at the prime end of the market in the retail and industrial sectors, with the office sector lagging behind over the next two years.
Economic expansion is expected to...
Czech Republic Renewables
BMI View: We expect the non-hydropower renewables sector to remain stagnant over the coming decade as investor interest in the market remains subdued. Concerns about the country's economic competiveness and previous difficulties with setting renewables subsidies at a sustainable level have led the government to scale back - and almost abandon - its pursuit of renewable energy. With cheaper fuel sources taking priority, we maintain our reserved outlook for the industry.
Czech Republic Retail
BMI View: Retailing in the Czech Republic has experienced a robust recovery over 2015, with greater spending allowing retail sales growth to accelerate. We attribute these improvements to healthier market conditions and higher confidence among Czech households. Stronger economic growth will help lower unemployment and raise household incomes. Despite this, the retail market is relatively matured and this will limit the expansion opportunities of many retailers while major players will be investigating merger and acquisition opportunities.
The Czech Republic's economy has managed to maintain the fastest growth in the region. With 2016's projected real GDP growth rate of 4.0%, it is set to lead the economic union of 28 countries. This represents a marginal slowdown from 2015's 4.2% however also follows a contraction in 2012-2013 and a modest 1.9%...
Czech Republic Telecommunications
BMI View: Mobile broadband services are currently driving the Czech telecoms market. Wireline investments in fibre and xDSL are continuing, but with operators facing strong competition from mobile IP services, there is little inclination to invest heavily. However, there are limits to customers' willingness to pay a premium for non-voice services. Success will come from innovations in the way operators package services. Multi-play and convergence will be key to ensuring attractive returns on investment.
|Advanced Services Key To Revenue Growth In Saturated Market|
|Mobile Market Forecasts, 2014-2020|
Czech Republic Tourism
BMI View : The Czech Republic has a well-established but slightly restricted tourism sector. Prague, as the capital, is well represented by major hotel chains; however, this leaves little room for new hotels to enter the market. Arrivals will continue to be strong, especially from the European market where the country is seen as a good option for a short break, especially to Prague. Inbound tourism is set to be boosted by Asian and Middle Eastern source markets, with the Czech Republic keen to build bridges between themseleves and China in particular. The biggest threat facing the sector is the potential for a drop in the economy of the key source markets, especially the euro.
Czech Republic Water
BMI View: In recent years, the Czech Republic has seen many improvements and developments in its water sector, especially with regard to efficiency and wastewater treatment. As the population begins to grow more rapidly, these improvements will show their worth. As consumption and extraction increase, the efficient and modern infrastructure will ensure minimal losses and excellent wastewater treatment.
The Czech Republic has a modern, extensive and relatively efficient water sector. The country's recent history has seen many developments in the industry, 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...