Czech Republic

	Score	Rank
Financial Standards Index	52.50 out of 100	31
Business Indicator Index	10.98 out of 12	12

Business Indicators Summary

With an overall score of 10.98/12, the Czech Republic is at standard on the economic, legal, and political indicators that make up our Business Index. The Czech Republic, which has successfully transitioned to a market-based economy, is committed to a free market and maintains a generally open economy with few barriers to trade and investment. As a member of the European Union (EU), the Czech Republic has adopted tariffs and standards which conform to EU requirements. The Czech Republic has one of the most developed and industrialized economies among former communist countries in the region. Czech investment laws are now in harmony with EU legislation, although difficulties have been observed in the enforcement of contractual rights. The government encourages foreign investment and maintains an open investment environment, provides equal legal treatment to foreign and domestic investors, and offers export and tax incentives. Foreign currency accounts are permissible both domestically and abroad, and the government allows total ownership of domestic enterprises and the establishment of joint ventures by foreign investors. Foreigners are not allowed to purchase land, but branches of foreign companies can acquire real estate. Corruption appears to be of no serious concern for investors as reflected in Transparency International’s 2009 Corruption Perceptions Index.

Business Indicators

Economic Model
Forex Regulations
- Capital Controls
- Exchange Controls
Foreign Investment Law
Trade Regulation
Tax Regime
Tax Rates
Bankruptcy Indicators
International Dispute Settlement
Political Environment
Political Stability
Corruption
Adherence to global labor standards

Economic ModelMarket-based economy

The 2009 Economic Freedom of the World Annual Report by Gwartney et al. calculates a score of 8 (out of 10, with a higher value signifying greater economic freedom) for the factor "Government Enterprises and Investment" as a percentage of total investment for Czech Republic.

The 2008 U.S. Department of State (DoS) report notes that the Czech Republic has one of the most developed and industrialized economies among former communist countries in the region. The country's geographic location in Europe is strategic, with a low-cost structure and a skilled work force that has attracted high inflows of foreign direct investment (FDI). The International Monetary Fund's (IMF) 2008 Article IV Consultation with the Czech Republic reports that strong economic fundamentals have helped sustain the Czech economy through the global financial crisis up until the end of 2008. Unfortunately, the Czech Republic did not remain immune to the effects of the crisis, due to its increasing integration with the rest of the European Union (EU) and its high level of foreign ownership of domestic banking assets.

The IMF projects the country’s GDP growth, which was 6 percent over 2005-2007 and 4 percent in 2008, to fall to 1.5 percent in 2009. Inflation rates, which started rising sharply in 2007, are also projected to fall to 2.5 percent in 2009 amidst weakening demand and deteriorating commodity prices. The 2008 Heritage Foundation Index of Economic Freedom indicates that total government expenditure, including consumption and transfer payments, equaled 43.6 percent of GDP in the past year The Czech Republic’s transition to a more market-based economy has resulted in the rise of the private sector's share of GDP to over 85 percent.

Sources

Gwartney, J., et al., “Economic Freedom of the World – 2009 Annual Report,” September 2009. Available from Frazer Institute website. Accessed on December 8, 2009. (Gwartney et al. 2009)
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Heritage Foundation, "2009 Index of Economic Freedom," 2009. Available from Heritage Foundation website. Accessed on December 8, 2009. (HF 2009)
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International Monetary Fund, "Czech Republic: 2008 Article IV Consultation--Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for the Czech Republic," Country Report No. 09/122, Washington, D.C.: IMF, April 2009. Available from International Monetary Fund website. Accessed on December 8, 2009. (IMF 2009)
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U.S. Department of State, "Background Note: Czech Republic," July 2009. Available from U.S. Department of State website. Accessed on December 8, 2009. (U.S. DoS 2009)
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