Czech Republic - Overview
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After four consecutive years of severe austerity, the economy plunged into a deep recession and the citizens' morale is at a low. Both household consumption and state investment collapsed, a decline in purchases lead to a decline in industrial production, the levels of national debt continue to soar, and the budget deficit remains at around 3% only at the price of a VAT increase, lower salaries of civil servants, freezing pensions and under-investment in key sectors such as education, research and infrastructure. The National Bank devalued the national currency by 5% and has massively intervened on the exchange market in order to avoid deflation. Due to a policy of austerity which many consider excessive, the public deficit has been reduced to under 3% of the GDOP and the debt is less than 50% of the GDP. The 2014 budget plans of increasing the deficit, yet keep it under the 3% limit set by the EU. The government has been trying to boost consumption and exports. Its long-term goal is to make the Czech Republic one of the world's twenty most competitive economies by 2020, by developing infrastructure, strengthening institutions and governance, reforming the education sector, increasing labor market flexibility and improving the business climate. Export diversification is also part of the strategy.
The unemployment rate, which has increased under the effect of the global crisis, stands at around 10% of the active population. Real income dropped by 2% in 2012.
The production sector is mostly private, it accounts for almost 40% of the GNP and employs 40% of the active population. The growth at the level of performance was parallel to the increase in manpower's productivity. One of the main manufacturing sectors is the auto industry, with Skoda (Volkswagen company). Since 2005, other foreign investors, such as Toyota and PSA, have also been manufacturing cars in the Czech Republic. However, this sector has now reached a saturation point. Nearly 10,000 jobs were eliminated in 2009 because of the international crisis. The textile sector is becoming very dynamic.
Services contribute to 60% of the GDP and employ almost 60% of the active population. The tourism sector is booming, thanks to the city of Prague, in particular, which is a very attractive tourist center.
Foreign trade overview
The country has recorded a structural positive trade balance since it became a member of the European Union, a trend that should continue. Exports benefit from the good state of the German economy, which accounts for a third of the country's foreign trade. In 2013, the trade surplus increased with exports rising by 2.8% compared to 2012 and imports increasing by 1.4%.
After reaching a record level in 2012 (highest since 2005), FDI dried up in 2013 and should again resume an upward trend.
The European Union and the United States are the two main foreign investors in the Czech Republic.