2017 Index of Economic Freedom

Czech Republic

overall score73.3
world rank28
Rule of Law

Property Rights70.3

Government Integrity55.9

Judicial Effectiveness55.9

Government Size

Government Spending45.3

Tax Burden82.9

Fiscal Health92.0

Regulatory Efficiency

Business Freedom67.2

Labor Freedom77.7

Monetary Freedom85.8

Open Markets

Trade Freedom87.0

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 10.5 million
  • GDP (PPP):
    • $332.5 billion
    • 4.2% growth
    • 1.3% 5-year compound annual growth
    • $31,550 per capita
  • Unemployment:
    • 5.2%
  • Inflation (CPI):
    • 0.3%
  • FDI Inflow:
    • $1.2 billion
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Implementation of critical reforms in many areas has gradually expanded the Czech Republic’s vibrant private sector. Business start-up procedures have been streamlined, and a relatively efficient tax regime facilitates entrepreneurial growth. With openness to global trade and investment fully institutionalized, the Czech Republic has one of the lowest unemployment rates in the European Union.

Continuing fiscal consolidation and better management of public finance will be critical to controlling inflation and ensuring economic resilience. The eurozone crisis has dampened public support for adopting the euro, and prospects for its adoption remain uncertain. Contributing to overall stability and competitiveness, a relatively sound legal framework sustains judicial effectiveness and government integrity.

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Background

The end of Czechoslovakia’s Communist dictatorship in 1989 led to the election of dissident playwright Vaclav Havel as president. The Czech Republic separated from Slovakia in 1993 and joined NATO in 1999 and the European Union in 2004. The first directly elected president, Miloš Zeman of the center-left Czech Social Democrat Party, appointed a caretaker government in August 2013, and legislative elections followed in October. In January 2014, Zeman asked Social Democrat leader Bohuslav Sobotka to form a government. Polling shows low satisfaction with EU membership. In 2016, “Czechia” was officially registered at the United Nations as an alternate name for the country.

Rule of LawView Methodology

Property Rights 70.3 Create a Graph using this measurement

Government Integrity 55.9 Create a Graph using this measurement

Judicial Effectiveness 55.9 Create a Graph using this measurement

Property rights are relatively well protected, and contracts are generally secure. The independence of the judiciary is largely respected, though its complexity and multilayered composition lead to the slow delivery of judgments. While corruption and political pressure are still present within law enforcement agencies, the Office of the Public Prosecutor has become more independent in recent years.

Government SizeView Methodology

The individual income tax rate is a flat 15 percent, and the standard corporate tax rate is 19 percent. Other taxes include a value-added tax and an inheritance tax. The overall tax burden equals 33.5 percent of total domestic income. Government spending has amounted to 42.7 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.7 percent of GDP. Public debt is equivalent to 40.9 percent of GDP.

Regulatory EfficiencyView Methodology

Business formation and operation are possible without bureaucratic interference, and no minimum capital is required. Recent reforms have reduced the cost and number of procedures required to launch a company. The labor market is relatively flexible, and the unemployment rate continues to decline. The state energy program includes increased reliance on unsubsidized nuclear power, although subsidies for fossil fuels have increased.

Open MarketsView Methodology

Trade is extremely important to the Czech Republic’s economy; the value of exports and imports taken together equals 163 percent of GDP. The average applied tariff rate is 1.5 percent, and the government has reduced bureaucratic barriers to investment. The financial sector remains resilient. Banks are well capitalized and stable, and liquidity levels are gradually increasing.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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