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Czech Republic
 

Country
GDP per Capita: $5,476 GDP (USD Billions): 56.4 Inflation (CPI): 3.8% Currency: 1 Korona=100 Haleru 1USD=37.04CZK Population: 10.3M Labor Force : 3.65M Unemployment: 9.4% Language: Czech, Slovak Major Industries: fuels, ferrous metallurgy, machinery and equipment, coal, motor vehicles, glass, armaments Political System: Parliamentary democracy Economic System: Free market economy President: Vaclav Havel; Prime Minister: Milos Zeman Capital: Prague Candidate country for the first round of the EU admission.

Czech Republic

Political and financial crises in 1997 shattered the Czech Republic's image as one of the most stable and prosperous of post-Communist states. Delays in enterprise restructuring and failure to develop a well-functioning capital market played major roles in Czech economic troubles, which culminated in a currency crisis. The currency was forced out of its fluctuation band as investors worried that the current account deficit, which reached nearly 8% of GDP in 1996, would become unsustainable. After expending $3 billion in vain to support the currency, the central bank let it float. The growing current account imbalance reflected a surge in domestic demand and poor export performance, as wage increases outpaced productivity. The government was forced to introduce two austerity packages later in the spring which cut government spending by 2.5% of GDP. A tough 1998 budget continued the painful medicine. These problems were compounded in the summer of 1997 by unprecedented flooding which inundated much of the eastern part of the country. Czech difficulties contrast with earlier achievements of strong GDP growth, a balanced budget, and inflation and unemployment that were among the lowest in the region. The Czech economy's transition problems continue to be too much direct and indirect government influence on the privatized economy, the sometimes ineffective management of privatized firms, and a shortage of experienced financial analysts for the banking system. The country slipped into a mild recession in 1998, but rebounded with 1% growth in 1999.

Comment:

Commercial and investment opportunities in the Czech Republic are numerous - German industrial links are common, many businesses are competitive but not highly profitable. Restructuring of industries continues but privatisation has not been matched by industrial restructuring. New, dynamic and modern businesses are now everywhere but tend to be dependent on export markets. Businesses do not always pursue profits, and inter-company relationships are generally better based on products than on services.