Panorama: Overview of Czech Republic
The Czech Republic is back on fast track. After falling into recession in 2012 and 2013 due to sharp fiscal consolidation and sovereign debt crisis in the Eurozone, the economy regained momentum reaching solid growth rate of 2.0% in 2014 and should gain speed with 2.5% growth in 2015, according to Coface forecast. The improved outlook for the Czech main trading partners in the Eurozone has translated into growth of exports which are responsible for 84% of the country’s GDP. A significant part of Czech exports is driven by its automotive industry which arouses to be a country’s specialty. Nevertheless, the domestic demand plays a sizably role in the Czech economic growth, especially now with positive developments on the labour market contributing to rising private consumption.
The first part of the Panorama considers the Czech Republic as a manufacturing hub for German and other European investors thanks to relatively cheap and high skilled labour force, geographical proximity to core markets, solid economic framework and fair business environment. In return for its openness and strong foreign manufacturing presence the economy is quite dependent on Euro- pean markets, a few industries and global groups.
In its sectoral part this Panorama focuses on automotive and retail sectors. The automotive section especially highlights the manufacturing of passenger cars, with VW’s Skoda and foreign brands making the Czech Republic the 13th world biggest producer of cars. The paper also investigates if it is a result of attractive labour costs or workforce skills. Whereas the automotive industry produces mostly for exports, the retail sector is driven by domestic demand. On one hand retail is benefiting from increased private consumption but on the other it is subject to fierce competition and low margins.