Czech Republic: country overview

30 May 2012
by Ina Dimireva -- last modified 30 May 2012

The Czech Republic is a stable and prosperous market economy, which harmonized its laws and regulations with those of the EU prior to its EU accession in 2004.

Year of EU entry: 2004

Member of Schengen area:Yes

Political system: Republic

Capital city: Prague

Total area: 78 866 km²

Population: 10.5 million

Currency: Czech koruna

Listen to the official EU language: Czech

Czech Republic map

Country Overview

The Czech Republic became an independent state in January 1993 after Czechoslovakia split into its two constituent parts. Before World War II, Czechoslovakia was one of the 10 most industrialised states in the world, and the only central European country to remain a democracy until 1938.

Manufacturing is still a major economic activity, especially the production of automobiles, machine tools, and engineering products. Iron and steel industries are important in Moravia in the east of the country. The chief crops are maize, sugar beet, potatoes, wheat, barley, and rye.

The Czech Republic produces world-famous beer, including Pilsner. Wine is produced in the southern regions of Moravia and in part of Bohemia. A record 900 natural springs have also ensured that the country produces plenty of mineral water. Traditional dishes include " knedlíky ", a type of dumpling made from potatoes or bread.

Economy Overview

While the conservative, inward-looking Czech financial system has remained relatively healthy, the small, open, export-driven Czech economy remains sensitive to changes in the economic performance of its main export markets, especially Germany. When Western Europe and Germany fell into recession in late 2008, demand for Czech goods plunged, leading to double digit drops in industrial production and exports. As a result, real GDP fell 4.7% in 2009, with most of the decline occurring during the first quarter. Real GDP, however, has slowly recovered with positive quarter-on-quarter growth starting in the second half of 2009 and continuing throughout 2011. The auto industry remains the largest single industry, and, together with its upstream suppliers, accounts for nearly 24% of Czech manufacturing. The Czech Republic produced more than a million cars for the first time in 2010, over 80% of which were exported. Foreign and domestic businesses alike voice concerns about corruption especially in public procurement. Other long term challenges include dealing with a rapidly aging population, funding an unsustainable pension and health care system, and diversifying away from manufacturing and toward a more high-tech, services-based, knowledge economy.