Editing Economy of the Czech Republic (section)

==History==
===From industrialisation to communism (1800-1989)===
{{Further|Economy of Czechoslovakia|Economy of communist Czechoslovakia}}
The Czech lands were among the first industrialized countries in continental Europe during the [[German Confederation]] era. The Czech industrial tradition dates back to the 19th century, when the [[Lands of the Bohemian Crown]] were the economic and industrial heartland of the [[Austrian Empire]] and later the Austrian side of [[Austria-Hungary]].<ref>{{Cite web |last=Mutschlechner |first=Martin |date=2014-06-06 |title=The Czechs in the Habsburg Monarchy |url=https://ww1.habsburger.net/en/chapters/czechs-habsburg-monarchy |access-date=2025-04-08 |website=Der Erste Weltkrieg |language=en}}</ref> The Czech lands produced a majority (about 70%) of all industrial goods in the Empire, some of which were almost monopolistic.

After the First World War, the Austrian-Hungarian Empire collapsed and independent [[Czechoslovakia]] was created. Czechoslovakia had way too big industrial production for a small internal market and it missed the big market of the former Empire. The [[Czechoslovak koruna|Czechoslovak crown]] was introduced in April 1919 at a 1:1 ratio to the Austro-Hungarian currency, it became one of the most stable currencies in Europe.{{Citation needed|date=April 2025}} It is a widespread myth among Czechs that the [[First Czechoslovak Republic|First Republic]] belonged to the 10 most developed economies of the world. In fact it had the 14th highest GDP per capita in the world. The Czech part (without [[Slovakia]] and [[Transcarpathia]]) had a similar GDP in the 1920s to Germany and Belgium, which was higher than that of the crisis-struck [[First Austrian Republic|Austrian First Republic]].<ref>{{Cite web |last=Houska |first=Ondřej |date=2023-10-27 |title=Vrátíme Česko mezi nejbohatší státy světa, hlásají politici. Jenže Češi tam nikdy nepatřili, ani za Masaryka |url=https://archiv.hn.cz/c1-67259010-vratime-cesko-mezi-nejbohatsi-staty-sveta-hlasaji-politici-jenze-cesi-tam-nikdy-nepatrili-ani-za-masaryka |access-date=2024-10-19 |website=Hospodářské noviny (HN.cz) |language=cs}}</ref>

The consequences of the 1938 [[Munich Agreement]] and subsequent [[Nazi Germany]] occupation were disastrous for the economy. After the occupation and forced subordination of the economy to Nazi German economic interests, the crown was officially pegged to the mark at a ratio of 1:10, even though the unofficial exchange rate was 1 to 6-7 and Germans immediately started buying Czech goods in large quantities.<ref>{{cite web|title=History of Czechoslovak currency|url=http://www.zlate-mince.cz/OM9_Ceskoslovenska_mena.htm|website=zlate-mince.cz|access-date=17 July 2014|language=cs}}</ref>

After the [[World War II]] and the [[1948 Czechoslovak coup d'état|Communist Coup d'état]] were all the economies of the [[Socialist state|socialist countries]] tightly linked to that of the [[Soviet Union]], in accordance with [[Stalinism|Stalin]]'s development policy of planned interdependence. [[Czechoslovakia]] was the most prosperous country in the [[Eastern Bloc]], however it was [[Economy of communist Czechoslovakia#Growth rates|during the decades overtaken]] not only by Austria or Finland but also Southern European economies like that of Italy, Spain or Greece.[[File:Nové Město, Na příkopě 28, Česká národní banka.jpg|thumb|[[Czech National Bank]] headquarters in Prague]]
[[File:VysokePece1.jpg|thumb|[[Heavy industry]] such as [[steelmaking]] is a traditional part of the Czech economy.]]
[[File:380 005 9 Praha.jpg|thumb|Transportation equipment, machinery manufacturing and engineering are essential for the Czech economy.]]

===1989–1995===
The "[[Velvet Revolution]]" in 1989, offered a chance for profound and sustained political and economic reform. With the disintegration of the communist economic alliance in 1991, Czech manufacturers lost their traditional markets among former communist countries in the east. Signs of economic resurgence began to appear in the wake of the [[shock therapy (economics)|shock therapy]] that the [[International Monetary Fund]] (IMF) labelled the "''big bang''" of January 1991. Since then, consistent liberalization and astute economic management has led to the removal of 95% of all price controls, low unemployment, a positive [[balance of payments]] position, a stable [[exchange rate]], a shift of exports from former [[Eastern bloc|communist economic bloc]] markets to Western Europe, and relatively low [[foreign debt]]. Inflation has been higher than in some other countries – mostly in the 10% range<ref>{{Cite web |last=International Monetary Fund |date=October 2023 |title=International Monetary Fund: Czech Republic, 15 INDICATORS, 1980 - 2028 |url=https://www.imf.org/external/datamapper/profile/CZE |url-status=live |archive-url=https://web.archive.org/web/20231216200252/https://www.imf.org/external/datamapper/profile/CZE |archive-date=December 16, 2023 |access-date=2023-12-16 |website=International Monetary Fund}}</ref> – and the government has run consistent modest [[budget deficit]]s.{{Citation needed|date=December 2008}}

Two government priorities have been strict [[fiscal policy|fiscal policies]] and creating a good climate for incoming investment in the republic. Following a series of currency [[devaluation]]s, the [[Czech koruna|crown]] has remained stable in relation to the [[US dollar]].{{Citation needed|date=December 2008}} The Czech crown became fully [[convertibility|convertible]] for most business purposes in late 1995.

In order to stimulate the economy and attract foreign partners, the government has revamped the legal and administrative structure governing investment. With the breakup of the Soviet Union, the country, till that point highly dependent on exports to the USSR, had to make a radical shift in economic outlook: away from the East, and towards the West. This necessitated the restructuring of existing banking and telecommunications facilities, as well as adjusting commercial laws and practices to fit Western standards. Further minimizing reliance on a single major partner, successive Czech governments have welcomed U.S. investment (amongst others) as a counterbalance to the strong economic influence of Western European partners, especially of their powerful neighbour, Germany. <!-- Which was not always successful, see the flop with Boeing vs Aero Vodochody. --> Although [[foreign direct investment]] (FDI) runs in uneven cycles, with a 12.9% share of total FDI between 1990 and March 1998, the U.S. was the third-largest foreign investor in the Czech economy, behind Germany and the Netherlands.

The country boasts a flourishing consumer production sector and has [[privatization|privatized]] most state-owned heavy industries through the [[voucher privatization]] system. Under the system, every citizen was given the opportunity to buy, for a moderate price, a book of vouchers that represents potential shares in any state-owned company. The voucher holders could then invest their vouchers, increasing the capital base of the chosen company, and creating a nation of citizen share-holders. This is in contrast to Russian privatization, which consisted of sales of communal assets to private companies rather than share-transfer to citizens. The effect of this policy has been dramatic. Under communism, state ownership of businesses was estimated to be 97%.{{Citation needed|date=December 2008}} Privatization through restitution of real estate to the former owners was largely completed in 1992. By 1998, more than 80% of enterprises were in private hands. Now completed,{{Citation needed|date=December 2008}} the program has made Czechs, who own shares of each of the Czech companies, one of the highest per-capita share owners in the world.{{Citation needed|date=January 2009}} On the other hand, by the public is the voucher privatisation seen mostly as unfair and source of [[corruption]].<ref>{{Cite web |date=2005-06-01 |title=Why do most Czechs regard early 90s voucher privatisation as unfair? |url=https://english.radio.cz/why-do-most-czechs-regard-early-90s-voucher-privatisation-unfair-8099520 |access-date=2025-04-08 |website=Radio Prague International |language=en}}</ref>

===1995–2000===
[[File:Škoda Auto Mladá Boleslav.jpg|thumb|[[Škoda Auto]] is the largest automobile manufacturer in the Czech Republic.]]
The country's economic transformation was far from complete. Political and financial crises in 1997 shattered the Czech Republic's image as one of the most stable and prosperous of post-Communist states. Delays in enterprise restructuring and failure to develop a well-functioning capital market played major roles in Czech economic troubles, which culminated in a currency crisis in May. The formerly pegged currency was forced into a floating system as investors sold their Korunas faster than the government could buy them. This followed a worldwide trend to divest from developing countries that year. Investors also worried the republic's economic transformation was far from complete. Another complicating factor was the current account deficit, which reached nearly 8% of GDP.

In response to the crisis, two [[austerity]] packages were introduced later in the spring (called vernacularly "The Packages"), which cut government spending by 2.5% of GDP. Growth dropped to 0.3% in 1997, −2.3% in 1998, and −0.5% in 1999. The government established a restructuring agency in 1999 and launched a revitalization program – to spur the sale of firms to foreign companies. Key priorities included accelerating legislative convergence with EU norms, restructuring enterprises, and privatising banks and utilities. The economy, fueled by increased export growth and investment, was expected to recover by 2000.

===2000–2005===
Growth in 2000–05 was supported by exports to the EU, primarily to Germany, and a strong recovery of foreign and domestic investment. Domestic demand is playing an ever more important role in underpinning growth as interest rates drop and the availability of credit cards and mortgages increases. Current account deficits of around 5% of GDP are beginning to decline as demand for Czech products in the European Union increases. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult pension and healthcare reforms will have to wait until after the next elections. Privatization of the state-owned telecommunications firm [[Český Telecom]] took place in 2005. Intensified restructuring among large enterprises, improvements in the financial sector, and effective use of available EU funds should strengthen output growth.

===2005–2010===
Growth continued in the first years of the EU membership. The credit portion of the [[2008 financial crisis]] did not affect the Czech Republic much, mostly due to its stable banking sector which has learned its lessons during a smaller crisis in the late 1990s and became much more cautious. As a fraction of the GDP, the Czech public debt is among the smallest ones in Central and Eastern Europe. Moreover, unlike many other post-communist countries, an overwhelming majority of the [[household debt]] – over 99% – is denominated in the local Czech currency. That's why the country wasn't affected by the shrunken money supply in the U.S. dollars.

However, as a large exporter, the economy was sensitive to the decrease of the demand in Germany and other trading partners. In the middle of 2009, the annual drop of the GDP for 2009 was estimated around 3% or 4.3%,<ref>{{cite web|url=http://www.earthtimes.org/articles/show/278536,czech-economy-to-shrink-by-43-per-cent-in-2009.html|title=Earth Times: show/278536,czech-economy-to-shrink-by-43-per-cent-in-2009.html|access-date=3 March 2015|archive-date=28 December 2017|archive-url=https://web.archive.org/web/20171228171827/http://www.earthtimes.org/articles/show/278536,czech-economy-to-shrink-by-43-per-cent-in-2009.html|url-status=dead}}</ref> a relatively modest decrease. The impact of the economic crisis may have been limited by the existence of the national currency that temporarily weakened in H1 of 2009, simplifying the life of the exporters. The Czech Republic has a well-educated population and a densely developed infrastructure.<ref>{{cite journal |author=Petr Pabian |date=2009 |title=Europeanisation of higher education governance in the post-communist context: The case of the Czech Republic |journal=European Integration and the Governance of Higher Education and Research |pages=257–278}}</ref>

===2010–2019===
[[File:Smartwings Hungary Boeing 737-800 HA-LKG.jpg|thumb|[[Smartwings]] is the major Czech airline holding company with subsidies including the [[Czech Airlines]].]]
Due to the [[Great Recession]], Czech Republic was in stagnation or decreasing of GDP. Some commenters and economists criticising fiscally conservative policy of Petr Nečas' right-wing government, especially criticising ex-minister of finance, [[Miroslav Kalousek]]. Miroslav Kalousek in a 2008 interview, as minister of finance in the center-right government of Mirek Topolánek, said "Czech Republic will not suffer by financial crisis".<ref>{{cite web|url=http://hn.ihned.cz/c1-28777680-mozna-vas-zklamu-krize-nam-nehrozi|title=Miroslav Kalousek: Moná vás zklamu: krize nám nehrozí|work=Hospodáøské noviny|access-date=3 March 2015|date=2008-10-06}}</ref> In September 2008, Miroslav Kalousek formed state budget with projection of 5% GDP increase in 2009. In 2009 and 2010, Czech Republic suffered strong economical crisis and GDP decreased by 4,5%. From 2009 to 2012, Czech Republic suffered highest state budget deficits in history of independent Czech Republic. From 2008 to 2012, the public debt of Czech Republic increased by 18,9%. Most decrease of industrial output was in construction industry (-25% in 2009, -15,5% in 2013). From 4Q 2009 to 1Q 2013, GDP decreased by 7,8%.

In 2012, Czech government increased [[VAT]]. Basic VAT was increased from 20% in 2012 to 21% in 2013 and reduced VAT increased from 14% to 15% in 2013. Small enterprises sales decreased by 21% from 2012 to 2013 as result of increasing VAT.<ref>{{cite web|url=http://www.kurzy.cz/makroekonomika/sluzby/|title=Služby - vývoj tržeb ve službách v ČR, 2015|access-date=3 March 2015}}</ref> Patria.cz predicting sales stagnation and mild increase in 2013.
Another problem is foreign trade. The Czech Republic is considered an export economy (the Czech Republic has strong machinery and automobile industries), however in 2013, foreign trade rapidly decreased which led to many other problems and increase of state budget deficit. In 2013, Czech National Bank, central bank, implemented controversial monetary step. To increase export and employment, CNB wilfully deflated Czech Crown (CZK), which inflation increased from 0.2% in November 2013, to 1.3% in 1Q 2014.

In 2014, GDP in the Czech Republic increased by 2% and is predicted to increase by 2.7% in 2015. In 2015, Czech Republic's economy grew by 4,2% and it's the fastest growing economy in the [[European Union]].<ref>{{cite web|url=http://www.ceskatelevize.cz/ct24/ekonomika/314126-ceska-ekonomika-roste-nejrychleji-v-cele-eu/|title=Česká ekonomika roste nejrychleji v celé EU|publisher=[[ČT24]]|access-date=9 June 2015}}</ref> On 29 May 2015, it was announced that growth of the Czech economy has increased from calculated 3,9% to 4,2%.<ref>{{cite web|url=https://www.czso.cz/csu/czso/cri/tvorba-a-uziti-hdp-1-ctvrtleti-2015|title= Tvorba a užití HDP - 1. čtvrtletí 2015, Rychlejší růst české ekonomiky potvrzen (in Czech)|publisher=Czech Statistical Office|access-date=29 May 2015}}</ref>[[File:Praha Nusle Pikrtova 1a.jpg|thumb|[[Computer security|Cybersecurity software]] company [[Avast]] had its IPO on the [[Prague Stock Exchange]] and the London Stock Exchange in 2018. The [[information and communications technology]] (ICT) and [[software development]] is a major sector of the Czech economy.<ref>{{cite journal | doi=10.1787/888933224163 | title=Figure 1.9 Share of ICT sector in total value added, 2013}}</ref>]]
In August 2015, Czech [[GDP growth]] was 4.4%, making the Czech economy the highest growing in Europe.<ref>{{cite news|url=https://www.bloomberg.com/news/articles/2015-08-14/czechs-power-eu-s-fastest-gdp-growth-as-romania-hungary-stumble|title=Czechs Power EU's Fastest GDP Growth as Romania, Hungary Stumble|publisher=[[Bloomberg News|Bloomberg Business]]|access-date=14 August 2015}}</ref> On 9 November 2015, unemployment in the Czech Republic was at 5.9%, the lowest number since February 2009.<ref>{{cite web|url=http://portal.mpsv.cz/upcr/media/tz/2015/11/2015_11_09_tz_nezamestnanost_rijen.pdf|title=Nezaměstnanost v říjnu opět klesla, lidí bez práce je nejméně od února 2009|access-date=9 November 2015|archive-url=https://web.archive.org/web/20160304061424/http://portal.mpsv.cz/upcr/media/tz/2015/11/2015_11_09_tz_nezamestnanost_rijen.pdf|archive-date=4 March 2016|url-status=dead}}</ref> On the other hand, the economy suffers from dividends being paid to the [[Foreign ownership|foreign owners]] of Czech companies (in 2016 worth CZK 289 billion). It is seen as a hurdle to catching up with the Western European economies and as a reason for salaries being only a third of neighbouring Germany or Austria.<ref>"[http://www.radio.cz/en/section/business/czech-foreign-owned-companies-take-second-biggest-dividend-yield-in-2017report Czech foreign owned companies take second biggest dividend yield in 2017:report]". ''[[Radio Prague]].'' 7 March 2018.</ref> In 2019 it was described by ''[[The Guardian]]'' as "one of Europe's most flourishing economies"<ref name=":1" />

=== 2020-present ===
The worldwide [[COVID-19 pandemic]] in the early 2020s as well as the European energy crisis caused by the [[Russian invasion of Ukraine|Russian full-scale invasion of Ukraine]] in 2022 hit the Czech economy hard. In 2023, the conservative German newspaper [[Die Welt]] called Czechia "Europe's sick man" as it was the only country not to economically recover from the pandemic trap. Furthermore, the newspaper highlighting the danger of Czechia being stuck in the [[Middle income trap|middle-income trap]],<ref name=":2">{{Cite web |date=2023-11-13 |title=Czechia is the 'sick man of Europe' says analysis in Germany's Die Welt |url=https://www.expats.cz/czech-news/article/czechia-is-the-sick-man-of-europe-says-analysis-in-germany-die-welt |access-date=2025-04-08 |website=www.expats.cz |language=en}}</ref> although it is labelled as [[World Bank high-income economy|high-income country by the World Bank]] since 2006.