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
The rebound in domestic demand gained momentum in H115, surpassing even our relatively optimistic expectations as evident in an impressive GDP growth outturn. We have upgraded our forecast for Czech real GDP growth in 2015 to 4.2% and in 2016 to 4.0% from 3.5% and 3.2% respectively. Domestic demand is rebounding rapidly, underpinned by record low borrowing costs, subdued inflation, tightening labour market, while external dynamics provide favourable conditions for the ongoing recovery.
While the popularity of centre-right opposition parties in the Czech Republic increased in mid-2015 at the expense of the centre-left coalition government of Prime Minister Bohuslav Sobotka, the latter will regain ground in the coming months.
While the Czech government of Prime Minister Bohuslav Sobotka will remain on an expansionary fiscal...
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. 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: 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: Our Europe Country Risk team continues to forecast strong and well-balanced economic expansion over the coming quarters, having registered among the highest pace of real GDP growth in Europe of 4.1% in H115. Strengthening external demand has been the key driving force behind this economic expansion, due to the Czech Republic's high level of economic openness (exports represented 83% of GDP in 2014), and the sizeable share of export-oriented manufacturing in employment. This will fuel consumption of food and drink, although growth rates will remain moderate due to the sector's maturity.
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: +2.8...
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 Information Technology
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...
Czech Republic Infrastructure
BMI View: Our forecasts for the Czech construction and infrastructure sector remain steady this quarter, with marginal growth of 3.3% 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....
Czech Republic Insurance
BMI View: Strong domestic economic growth underpins our expectations for steady growth in both life and non-life premiums over the course of our five year forecast period through to 2020. Rising rates of household spending and declining unemployment rates will drive demand for a range of insurable consumer products, while wider economic growth will support increases in corporate lines, particularly credit and financial guarantee insurance which is currently a minor line. While low interest rates continue to dampen demand for life insurance products, positive demographic trends and a growing middle class ensure some growth will be maintained.
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 Metals
BMI View: Czech steel producers continue to face a number of headwinds which stand to limit growth in output over the next few years. However, the industry continues to retain a competitive edge through its proximity to Germany as well as the development of new product lines by its leading producers.
The Czech Republic is one of the larger industrial metals producers in Central and Eastern Europe (CEE), producing 5.36mn tonnes (mnt) of crude steel in 2014, or about 3% of total EU output. Traditionally, the country's steel mills have been an important supplier of crude and finished steel products to Germany, while local producers have also thrived off the back of the Czech Republic's sizeable automobile manufacturing industry. However, like that of many EU states, the country's metals sector has faced a series of challenges in recent years, ranging from stagnant economic...
Czech Republic Mining
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...
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 Republic's petrochemicals market is set for strong growth in 2016 as a result of strong growth in the export-oriented automotive sector, but the shutdown of Unipetrol's cracker until July 2016 due to a fire in August is likely to undermine the petrochemicals industry's growth. Already, the shutdown is causing petrochemicals margins to fall and output to decline sharply.
In BMI's European Petrochemicals Risk/Reward Index, the Czech Republic scores 58.4 points out of a maximum of 100, up 0.3 points due to an improvement in its market risk score as a result of positive market trends. It retains its 10th position, which it has held for the past year, holding it alongside Russia. It lies 0.4 points behind Hungary and 10.3 points ahead of Turkey. BMI does not expect a significant change in its regional position over the medium term due to the limitations of domestic capacity and...
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, 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....
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 : This quarter our view on the Czech Republic's power market remains largely unvaried. We continue to see limited opportunities in the Czech renewables sector at present, as concerns over the country's economic competiveness and previous difficulties with setting renewables subsidies at a sustainable level, has 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, expecting non-hydro renewable generation to account for roughly 9% of total electricity generation by 2024....
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: The Czech telecoms market is on the verge of a change, as the first stage of connecting users comes to a close. The mobile market is saturated, meaning that operators must newly deepen their customer bases, while the fixed market requires heavy investments into advanced technologies. O2's split between a service and infrastructure company, the latter being called CETIN, may help provide greater broadband investments to meet the demand for content and other advanced services required by Czech customers. ARPU will remain low because of competition. Uptake of new services, such as smartphones, LTE, fibre or convergence, will happen in stages across the country.
|Convergence The Next Step|
|Bundled Subscriptions As Per Population (%), 2013-2014|
Czech Republic Tourism
BMI View : The tourism market in the Czech Republic is small but well established. The capital city Prague is home to a multitude of attractions and has long been popular as a short break and city break destination for visitors both from neighbouring states and across Western Europe. While arrivals from markets further afield are relatively small in comparison, some major Asia Pacific source markets are expanding, and this region will become a key focus for driving long-term growth in the Czech tourism market. In the short term, economic weakness in key European markets will dampen regional growth potential, while arrivals from other markets, such as the United States, are expected to fall as...
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...