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

BMI View:

Core Views:

  • 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 swell to 8.0% 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 2016, for when we forecast price growth to accelerate to...

Czech Republic Operational Risk Coverage (9)

Czech Republic Operational Risk

BMI View:

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

BMI View:

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 Logistics

BMI View:

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

BMI View:

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 (31)

Autos

Czech Republic Autos

BMI View:

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
(2013-2019)
f = BMI forecast. Source: Automotive Industry Association, BMI
Key Views
* CVs gaining from growing corporate car fleet spending...

Commercial Banking

Czech Republic Commercial Banking

BMI View:

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

Consumer Electronics

Czech Republic Consumer Electronics

BMI View:

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. Conditions have been challenging, however, with contraction in device spending in US dollar terms 2013-2015. The medium-term outlook is for a marked improvement as product cycles become more favourable at the same time as koruna appreciation boosts household purchasing power from 2016. This will reinforce the Czech Republic's position as one of the most lucrative markets in Central and Eastern Europe and underpins our forecast for a CAGR of 6.6% 2016-2020 to USD2.9bn in 2020. We consider the largest opportunities to be in the mobile PC segment, smart TVs and the high end of the smartphone...

Defence & Security

Czech Republic Defence & Security

BMI View:

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:

BMI View: We hold a positive outlook for the Czech Republic's food and drink industry, on the back of a stronger consumer profile and the emergence of premiumisation across the board. As the economy remains robust and a tight labour market continues to put upward pressure on real wages, consumers will increasingly trade up price points.

Food And Drink Spending
(2013-2020)
f = BMI forecast. Source: BMI, national statistics

Key Trends &...

Freight Transport

Czech Republic Freight Transport

BMI View:

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:

BMI View: We expect all freight modes to grow in 2016 and maintain positive growth rates over the medium term, driven by improved domestic demand and recovering European economies. The strong performing Czech manufacturing sector will support activity levels for rail and road freight while the government's strategic focus on electronics and software production is benefitting air freight.

Real GDP growth in the Czech Republic will average 2.6% in the 2017-2020 period after an anticipated 3.4% in 2016. These rates are in line with other European economies and namely Czech Republic's major trade partners, Germany, Poland and Slovakia for which we also forecast robust increase in imports, boosting Czech export volumes. A positive on domestic demand are the low levels of inflation and unemployment but with wages not increasing, imports growth is hindered. Low oil prices translate to...

Information Technology

Czech Republic Information Technology

BMI View:

BMI View: We revised down our growth outlook for IT spending in 2016 in the Q216 update to reflect a weaker economic outlook, but our core scenario nonetheless continues to be for strong growth over the medium term. We envisage a CAGR of 5.6% 2016-2020 to CZK99.6bn, with stronger performance in US dollar terms due to koruna appreciation. A strengthening currency is positive for economic confidence, for growth of household purchasing power that will support retail PC volume growth, as well as upside for increasing PC average selling prices as the middle class becomes more affluent. The software and services markets will still outperform, with the extent and sophistication of enterprise and public IT utilisation, and adoption of emerging technologies such as cloud computing and smart services positives in the Czech market...

Infrastructure

Czech Republic Infrastructure

BMI View:

BMI View: Our forecasts for the Czech construction and infrastructure sector remain steady this quarter, with marginal growth of 3.4% for 2015 and 2.9% for 2016. After struggling with underfunding for many years, the transport sector is enjoying EU-driven investment into its four trans-European transport corridors, which will sustain growth, particularly in the rail and roads sub-sectors, in the medium term. Residential and non-residential construction are further bright spots, with investor sentiment improving, house prices rising and new construction starts on the rise.

...

Insurance

Czech Republic Insurance

BMI View:

BMI View: The insurance market in the Czech Republic is relatively well developed, with a number of domestic and multinational insurers in the country providing a broad range of life and non-life products. The marketplace is fragmented and we do expect to see some consolidation among the smaller firms over the course of the forecast period, potentially via mergers and acquisitions by foreign firms attracted by the solid regulatory environment and growth potential. Although a small market, premiums in the Czech life market are forecast to grow steadily, supported by wider economic growth in the country - though we note that low interest rates will continue to dampen demand. In the non-life sector, following a short-term contraction, premiums are forecast to grow, particularly in the health insurance segment. Despite this growth penetration and density rates will remain relatively low, indicating that further longer term...

Medical Devices

Czech Republic Medical Devices

BMI View:

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.

...

Metals

Czech Republic Metals

BMI View:

BMI View: Tin prices will be capped by US dollar strength in 2016, leading us to trim our price forecast to USD14,500/tonne. Beyond 2016, prices will recover gradually as the global tin market posts sustained market deficits and inventories dwindle.

...
Global - Tin Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Czech Republic Metals

BMI View:

BMI view: We have revised our aluminium price forecast from USD1,575/tonne to USD1,600/tonne in 2016, as the tightening market provided an earlier than expected floor in Q116. Aluminium prices will gradually edge higher as the global market moves into a deficit by 2018.

...
Global - Aluminium Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f

Czech Republic Metals

BMI View:

BMI View: Globally, iron ore prices will remain subdued due to weak demand growth in China and expanding output by major miners in Australia and Brazil. China will see output slow as the country's iron ore miners operate on the higher end of the global iron ore cost curve.

...
Global Iron Ore Forecast
2014 2015e 2016f 2017f 2018f

Czech Republic Metals

BMI View:

BMI View: Nickel prices will bottom in 2016 as weak production drags the global market into deficit. For instance, we expect Chinese imports of nickel to grow over the coming quarters. Prices will begin 2016 weaker than we had previously expected and we have thus revised down our 2016 average price forecast to USD9,000/tonne from USD10,500/tonne.

...
Global Nickel Forecasts
2013 2014 2015e

Czech Republic Metals

BMI View:

BMI View: We have revised down our average copper price forecast for 2016 to USD4,900/tonne. We expect prices to find a floor over the first half of 2016, and begin to stabilise thereafter, supported by production cuts and modest consumption growth.

Global - Copper Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f ...

Czech Republic Metals

BMI View:

BMI View: Gold prices will prove resilient in 2016 due to a dovish shift in global monetary policy and elevated systemic financial sector risks. However, we do not foresee a sustained multi-year recovery and the mining sector will thus remain under significant stress. We forecast slowing mine production growth and increasing consolidation.

BMI Gold Forecasts
2014 2015 2016f 2017f ...

Czech Republic Metals

BMI View:

BMI View: Global steel prices will remain subdued due to a persistent steel oversupply over the coming quarters. From 2017 onwards, steel prices will gradually edge higher as the global steel surplus will narrow due to Chinese supply moderation.

Steel Price Forecast
2014 2015 2016f 2017f 2018f 2019f...

Czech Republic Metals

BMI View:

BMI View: We maintain our average zinc price forecast for 2016 of USD1,750/tonne. We expect zinc prices to reach a floor over the first half of 2016, and begin to stabilise thereafter, as production cuts shift the market to a deficit.

...
Global - Zinc Supply, Demand & Price Forecasts
2014 2015e 2016f 2017f 2018f

Czech Republic Metals

BMI View:

BMI View: Lead prices will gradually edge higher as the global lead market will shift into deficit by 2017 as production growth will slow over the coming years.

...
BMI Lead Price Forecast
Current* 2016f 2017f 2018f 2019f 2020f

Mining

Czech Republic Mining

BMI View:

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.

...
Czech Republic Mining Industry Value Forecast (2015-2020)
Indicator 2015e

Oil & Gas

Czech Republic Oil & Gas

BMI View:

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.

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

Petrochemicals

Czech Republic Petrochemicals

BMI View:

Czech polymers production appears to be unaffected by the shutdown of Unipetrol's cracker in August 2015 due to a fire, which will keep it out of operation until July 2016. The growth in margins on polyolefins at Unipetrol is an indication that the Czech Republic's market environment has improved. Export markets will be key to growth, with the German market remaining pivotal for the export of the country's manufactured products, particularly vehicles, which absorb the bulk of Czech petrochemicals production

In 2015, Czech chemicals output growth declined 4.5% y-o-y, and rubber and plastics rose by 9% y-o-y. Low naphtha costs have improved the competitiveness of the sector and boosted polyolefins margins, while higher sales volumes - particularly in the polypropylene segment - have been led by a manufacturing surge. Export-led industries have stimulated petrochemicals consumption, helping to...

Pharmaceuticals & Healthcare

Czech Republic Pharmaceuticals & Healthcare

BMI View:

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, with plans to further increase access to healthcare; pharmaceutical sales are expected to increase over the coming years.

Headline Expenditure Projections

  • Pharmaceuticals: CZK78.83bn (USD3.01bn) in 2015 to CZK81.10bn (USD3.27bn) in 2016; +2.9% in local currency terms and +8.6 % in US dollar terms. Forecasts in line with last quarter.

  • Healthcare: CZK284.72bn (USD10.87bn) in 2015 to CZK292.53bn (USD11.79bn) in 2016; +2.7% in local currency terms and +8.4% in US dollar terms....

Power

Czech Republic Power

BMI View:

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...

Real Estate

Czech Republic Real Estate

BMI View:

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...

Renewables

Czech Republic Renewables

BMI View:

BMI View: This quarter we have revised down our forecasts, as we expect to see limited opportunities in the Czech renewables sector. Concerns over 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.

...
Renewables Headline Forecasts (Czech Republic 2015-2020)

Retail

Czech Republic Retail

BMI View:

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%...

Telecommunications

Czech Republic Telecommunications

BMI View:

BMI View: We retain our view that the Czech mobile market is highly mature and is exhibiting classical signs of saturation. Characterized by a high degree of penetration, we do not estimate the subscribers number to increase significantly over the course of our forecast period. Nevertheless, we believe that the high levels of competition among the three telecoms companies have provided fresh impetus for organic growth in high data services. The operators have to deepen their customer bases. Data services growth, primarily fuelled by the heavy investment into 3G and now 4G and LTE-Advanced services will be the primary driver of growth during the course of our forecast period from 2016 to 2020. Furthermore, all three operators will continue to invest significantly over the next two years to improve their LTE infrastructure in the country and to prepare for the adoption of 5G technology from 2017/18...

Tourism

Czech Republic Tourism

BMI View:

BMI View : The Czech Republic tourist market remains small but well established. The Czech capital city of Prague is home to a multitude of attractions and has long remained popular as a short break and city break destination for visitors from neighbouring countries and across Western Europe. Looking forward, arrivals from Asian and Middle Eastern source markets will bolster the Czech tourism industry; however, over the short term, economic weaknesses in key European source markets will dampen regional growth prospects.

Key Forecasts (Czech Republic 2013-2020)
2013e ...

Water

Czech Republic Water

BMI View:

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...

Latest Czech Republic Articles

  • Britain's exit ('Brexit') from the EU would have significant geopolitical i...

  • While Emerging European banking sectors are generally poised for a better y...

  • The global iron ore market will stay in surplus over our forecast period to...

Latest Czech Republic Blogs

Latest Czech Republic Podcasts

  • Europe's 20-year telecoms competition initiative has benefited million...

  • The operating environment for energy firms in the European Union is ex...

×

Download PDF

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

Thank you for your interest

You will shortly receive your free executive summary by email.