The Czechia is the ninth most advanced economy in the European Union. In the newly assembled Prosperity Index of the Czech Republicwhich is a joint research of the Europe in Data project and the analytical team of Česká spořitelna, we are also beating countries such as Luxembourg, Ireland and Italy.
According to the index, Sweden is the most advanced economy in the union. Germany and Denmark follow. Thanks to its ninth place, the Czechia left a total of 18 EU countries, including all from the former Eastern bloc.
“The economic level measured by GDP per capita is higher in the Czech Republic than in Italy, Spain or Portugal. This is a great result of the economic transformation in the 1990s. However, since 2008 the pace of catching up with the German level has slowed significantly. We are in danger of falling into the trap of a middle-income economy. The Czech economy has begun to hit its limits due to underinvestment, the labor market and the structure of the economy, “says David Navrátil, Chief Economist of Česká spořitelna
“The limits are obvious, because even relatively low economic growth of around three percent can already create inflationary pressures. Before 2008, the Czech economy created inflationary pressures only at growth of around five or six percent, “adds Navrátil.
Greece has the least healthy economy in the EU, Poland is the penultimate and Bulgaria and Cyprus are third from the end.
“Greece appears in the last place in the comparison in exactly half of the examined categories and its economy is harmed mainly by high public debt, low investment, poor economic complexity and the highest deflation,” explains Tomáš Odstrčil, Europe’s data analyst.
Prosperity index – the state of the economy |
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| Country and order | “Criminal” points |
| 1. Sweden | 52 |
| 2. Germany | 80 |
| 3. Denmark | 88 |
| 4. Austria | 96 |
| 5. France | 102 |
| 6. The Netherlands | 108 |
| 7. Finland | 112 |
| 8. Belgium | 120 |
| 9. Czechia | 123 |
| 10. Ireland | 133 |
| 10. Romania | 133 |
| 12. Spain | 140 |
| 13. Italy | 145 |
| 14. Estonia | 148 |
| 15. Latvia | 149 |
| 16. Luxembourg | 150 |
| 17. Lithuania | 152 |
| 18. Croatia | 157 |
| 18. Hungary | 157 |
| 20. Slovenia | 163 |
| 21. Slovenia | 165 |
| 22. Malta | 166 |
| 23. Portugal | 178 |
| 24. Bulgaria | 180 |
| 24. Cyprus | 180 |
| 26. Poland | 187 |
| 27. Greece | 201 |
| Source: Europe in the data and Česká spořitelna | |
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Of the ten monitored factors, we performed best in terms of economic complexity, we are in second place after Germany. “The high level of complexity indicates that the Czech economy is very diversified. The Japanese economy needs to do the same. Diversification of the economy is a prerequisite for the economy to be able to cope with various economic shocks, “explains Navrátil.
Another strong factor that has secured us a good place in the prosperity index is the public debt-to-GDP ratio, which stands at 37.7%, making us the fourth largest in the EU. Only Estonia, Bulgaria and Luxembourg are doing better.
On the other hand, the Czechia is not fully able to use its potential. “The Czech Republic’s reserve is a low share of national income in the domestic product and low added value of the economy, which is why we are referred to as the assembly plant in Europe. It also has a worse position in the rankings due to the third highest inflation, “says Navrátil. In terms of these factors, the Czechia, on the other hand, is among the weakest countries.
“If we simplify it a lot, we have already caught up with Germany in terms of production. But the added value, or more simply the margin we are able to obtain from this production, is already 20% lower than in Germany. And another 10 percentage points is lower national income, which will eventually remain in the Czech Republic, “adds Navrátil.
Investing in education could help us, but we still underestimate it. They have the highest yield, but education is underfunded in the long run.
“In terms of the added value of exports, we are only 22nd. One of the important reasons is that we have not been able to ensure that education is available here. There are huge differences in the regions. The education system is completely impermeable and the biggest problem is wasting talent. The system educates students to mediocrity, which is a huge problem for value-added production. She can deal with below-average children better than with above-average children, ”explains Danuše Nerudová, a Czech economist and university teacher.
Results in detail: distribution of points according to individual categories.
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Paradoxically, our strength is also the level of investment in relation to GDP. Investments in the Czech Republic account for 26.25% of GDP. Compared to other EU countries, we ranked third. Only Ireland and Hungary are ahead of us.
Although the level of investment in the Czech Republic is quite high, this does not mean that it is a quality investment that will modernize the economy faster. Navrátil points out that the Czechia is one of the countries with the slowest pace of economic recovery. “After the financial crisis, we made a huge mistake in greatly reducing investment. And now we repeat that. Current investments are 9% lower than before. We have low productivity growth and underinvestment may worsen, ”he says.
The fact that investment is not heading in the right direction can be seen, for example, in the robotization of the Czech economy. The number of robots per worker in the Czech Republic is growing, but it is not enough. That is why the Czechia dropped out of the top twenty most robotic economies in the world. Germany is now the leader with 371 robots per 10,000 employees, followed by Sweden with 289 and Denmark with 246 robots. The Czechia has 162 robots.
Underinvestment is also seen in the rapidly rising real estate prices and declining availability of owner-occupied housing. We are one of the worst in the EU.
However, the Czechia has a very strong financial sector that is able to finance investments. Navrátil also points out that we have a lot of tools and money offered by the EU so that the Czechia can modernize. Our companies are also aware that this is a huge opportunity to contribute to the prosperity of the Czech Republic. “If they do not invest, they will lose their competitiveness on the international field,” adds the economist.
Czech companies can increase the added value of production by investing in research and innovation, designing their own products and services, increasing the share of final production, own distribution and offering follow-up services, which is related to improving relationships with end customers.
The Czechia is also hampered by insufficiently digitized public administration. Although the state has invested over 60 billion crowns in e-government since 2016, in international comparison we are only slightly better than Belarus. In the field of e-government, the Czechia falls to the twentieth place in the EU. Malta is the best, followed by Estonia and Luxembourg. In contrast, how well the Czechia is doing in the field of e-commerce. For example, one third of companies offer the opportunity to order goods online, which is the third highest share in the EU.
Finally, methodological note: The results are calculated from ten indicators, such as the ratio of GDP to national income, diversification of economic production, inflation, public debt to GDP or even the number of robots per capita. The researchers drew data from open sources such as Eurostat, OECD, WHO, the World Bank or the UN. Each indicator is evaluated with the same weight. The economic comparison is the first of a series of ten upcoming indices. In other studies, researchers will compare, for example, the level of education, the environment or the business environment.
Jana Divinová
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