Czech Republic - Market OverviewCzech Republic - Market Overview
The United States and the former Czechoslovakia forged a close relationship during the beginning of the 20th century, when America pledged its support for Czech independence. This friendship, which stalled during the period of Soviet influence, re-emerged as the Czech Republic gained political independence and joined the European Union. Today, this nation that sits at the heart of Europe has emerged as one of the region’s most prosperous and industrialized economies, serving as a bridge for U.S. companies expanding beyond the more traditional markets in Western Europe to the developing markets in the east.
- The Czech economy continued to expand in 2016 albeit at a slower pace than the blistering growth rate in 2015.
- Growth continued to be driven by domestic demand and strong growth in investment and trade.
- 2016 GDP growth was 2.3 percent and the economy is expected to continue to expand in 2017 (2.5 percent, est.) and in 2018.
- As of January 2017, the unemployment rate was the lowest in the EU at 3.2 percent.
- In 2013, the Czech National Bank capped the value of the Czech Crown (CZK) against the Euro, both to prevent deflation and to keep exports competitively priced.
- In April 2017, the CNB removed the currency cap due to resurgent inflation. The annual targeted inflation rate is between one to three percent. The CNB has projected an average inflation rate of 2.5 percent in 2017.
- As a medium-sized, open, export-driven economy, the Czech Republic is heavily dependent on foreign demand, especially from the Eurozone. Almost 84 percent of Czech exports go to fellow EU states. Of that amount, more than 60 percent are shipped to the Eurozone and 32 percent to the Czech Republic's largest trading partner, Germany.
- In 2016, the country’s top import source countries were Germany, China, and Poland. The U.S. ranked 13th among source countries.
- The trade balance has been positive every year since 2005, and in 2015 and 2016 rose substantially, with surpluses of around $16.8 billion (406.2 billion CZK) and $19.4 billion (486.6 billion CZK), respectively.
- Import commodities include machinery and transport equipment, manufactures, electronic equipment, chemicals and fuels.
- The main export commodities are automobiles, machinery, and information and communications technology.
- In 2016, U.S-Czech bilateral merchandise trade declined to $6.3 billion, down two percent from 2015. By comparison, U.S. bilateral merchandise trade to the EU declined by almost 18 percent over the same period.
- After five years of growth, U.S. merchandise exports to the Czech Republic declined by 14 percent (to $1.976 billion) in 2015. Exports further declined by two percent (to $1.934 billion) in 2016. U.S. exports were affected by the strong U.S. Dollar (the Czech Crown weakened by eight percent in 2015 and three percent in 2016 against the dollar).
- U.S. services exports to the Czech Republic were around the same level in 2015 ($1.196 billion) compared to 2014 ($1.200 billion).
- Since the Velvet Revolution, foreign investment has played a significant part in boosting Czech productivity. The U.S. has had an important role in this regard. As of 2015, the U.S. was the third largest non-European investor in the country.
- In 2015, cumulative U.S. FDI was reported to be $5.83 billion according to the Department of Commerce, Bureau of Economic Analysis ($1.57 billion according to the Czech National Bank).
Why U.S. Companies Should Consider Exporting to the Czech Republic
- The Czech Republic’s strategic location, well-developed infrastructure, and skilled labor force have allowed this small nation of 10.5 million to elevate itself as an important regional and international manufacturing hub and consumer market for Central and Eastern Europe.
- The Czech Republic ranked number one in Central and Eastern Europe in business sophistication and efficiency enhancers* and number two for macroeconomic environment and innovation in the 2016/2017 Global Competitiveness Report.
- The Czech Republic is a Tier 3, or ‘innovation driven’ economy, placing it on the same level as its neighbors to the west. As such it is very receptive to leading edge U.S. technology products and services.
- U.S. companies are increasing their investments in this country, which is very receptive to American business.