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Country focus on the Czech Republic 2018

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The Czech Republic’s economic freedom score is 74.2, making its economy the 24th most free in the 2018 Index. Its overall score has increased by 0.9 point, with improvements in business freedom, fiscal health, and government spending outweighing a decline in government integrity. The Czech Republic is ranked 13th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

 

Although populist, antiestablishment political parties are on the rise, the new government is expected to continue pro-EU, pro-business, and fiscally prudent policies. Previous governments’ implementation of critical reforms in many areas has created a vibrant private sector. Business start-up procedures are streamlined, a relatively efficient tax regime facilitates entrepreneurial growth, and openness to global trade and investment has been fully institutionalized. Contributing to overall stability and competitiveness, a relatively sound legal framework sustains judicial effectiveness and government integrity.

 

Major indicators

 

  • GDP Growth

  • Unemployement in% of active population

 

GDP growth:

2015: 4,3%

2016: 2,3%

2017: 4,5%

 

Unemployment rate:

5%(2015)

4% (2016)

3,4% (2017)

 

Population:

10,6 million

 

 

 

Strength and weaknesses

 

STRENGTHS
 

Track record of prudent macroeconomic management
Conservative macroeconomic, fiscal and monetary policies brought with them moderate private and public debt levels and contributed to the absence of distortive macroeconomic imbalances. The negative net international investment position mainly reflects non-debt foreign direct investment.

 

A solid and profitable financial sector
The largely foreign-owned banking sector is completely financed by local deposits, highly profitable and  well-capitalized, while non-performing loans remain at acceptable levels.

 

WEAKNESSES

 

Considerable dependence on exports to the EU
The Czech economy is very open and strongly integrated into EU manufacturing supply chains, particularly in the auto sector, which exposes it to external demand shocks.

 

Unstable government
The current Czech government does not have a stable parliamentary majority following the break-up of one of the coalition partners. In combination with poor approval ratings, this could lead to the delayed introduction of anticipated reforms.

Trade Credit environment

 

Credit insurance is not mature in Czech Republic. It is estimated to be 3 % of penetration.

 

Credit insurance is very specific in Czech Republic , mainly because of the inheritance of the Communist regime and especially the consecutive development of market. In 1992, EGAP (export and garuantee company) was established  that was one of many instruments economic policy of Czechoslovak federative Republic. EGAP performed function to support export large investment units and from 1997 to insure short-term receivables as well. In 2005 created new subsidiary KUPEG, which is trying to compete to three multinational companies Euler Hermes (entrance to Czech insurance market 1997), Atradius (2003) and Coface (2007).

 

There is a big interest for credit insurance for companies with following activities : Production and trade of iron, steel, building materials, chemistry, electronics and consumer goods. Less interest in the area of foodstuffs, healthcare, services etc. As of 2017, the market is stagnating ane the decrease of premium rates continues. The number of insolvencies is stable with  no major bankruptcy last year.

 

On the product point of view, Euler Hermes started with the offer for bonding.