2019 Index of Economic Freedom

Czech Republic

overall score73.7
world rank23
Rule of Law

Property Rights74.8

Government Integrity52.1

Judicial Effectiveness47.6

Government Size

Government Spending52.1

Tax Burden82.6

Fiscal Health97.6

Regulatory Efficiency

Business Freedom72.4

Labor Freedom78.1

Monetary Freedom81.5

Open Markets

Trade Freedom86.0

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 10.6 million
  • GDP (PPP):
    • $375.7 billion
    • 4.3% growth
    • 2.9% 5-year compound annual growth
    • $35,512 per capita
  • Unemployment:
    • 2.9%
  • Inflation (CPI):
    • 2.4%
  • FDI Inflow:
    • $7.4 billion

The Czech Republic’s economic freedom score is 73.7, making its economy the 23rd freest in the 2019 Index. Its overall score has decreased by 0.5 point, with lower scores for judicial effectiveness and monetary freedom overwhelming modest improvements in government spending and property rights. The Czech Republic is ranked 13th among 44 countries in the Europe region, and its overall score is above the regional and world averages.

Amid rising populism and political polarization, the government has been pulled slightly to the left by its Communist and other left-leaning coalition partners but is expected to continue pro-EU, pro-business, and fiscally prudent policies. Implementation of critical reforms by previous administrations streamlined business start-up procedures, embedded a relatively efficient tax regime to facilitate entrepreneurial growth, and institutionalized an openness to global trade and investment. Contributing to overall stability and competitiveness, a relatively sound legal framework sustains judicial effectiveness and government integrity.

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Background

The “Velvet Revolution” ended Czechoslovakia’s Communist dictatorship in 1989, and the Czech Republic became independent from Slovakia in 1993. President Miloš Zeman of the center-left Czech Social Democrat Party won a second term in 2018. Prime Minister Andrej Babis of the populist ANO movement, a billionaire former finance minister, formed a fragile minority coalition government in 2018 with the Social Democrats but relies on the support of the Communist Party. The return of the Communists to political power set off large protests in many cities. The Czech Republic’s prosperous market economy, led by automobile exports, boasts one of the European Union’s highest GDP growth rates, one of its lowest unemployment levels, and a rising standard of living.

Rule of LawView Methodology

Property Rights 74.8 Create a Graph using this measurement

Government Integrity 52.1 Create a Graph using this measurement

Judicial Effectiveness 47.6 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, although its complexity and multilayered composition delays the delivery of judgments and acts as a drag on investment. While corruption and political pressures still threaten 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 value-added and inheritance taxes. The overall tax burden equals 34.0 percent of total domestic income. Over the past three years, government spending has amounted to 40.0 percent of the country’s output (GDP), and budget surpluses have averaged 0.5 percent of GDP. Public debt is equivalent to 34.7 percent of GDP.

Regulatory EfficiencyView Methodology

Businesses can be formed and operated 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. Monetary policy continues toward gradual normalization following the removal of an exchange rate floor to permit market forces to determine currency prices.

Open MarketsView Methodology

The combined value of exports and imports is equal to 151.7 percent of GDP. The average applied tariff rate is 2.0 percent. The Czech Republic implements a number of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. The government has gradually reduced bureaucratic barriers to investment. The financial sector remains resilient. Banks are well capitalized and stable.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.90.2
2Ireland80.50.1
3United Kingdom78.90.9
4Iceland77.10.1
5Netherlands76.80.6
6Denmark76.70.1
7Estonia76.6-2.2
8Georgia75.9-0.3
9Luxembourg75.9-0.5
10Sweden75.2-1.1
11Finland74.90.8
12Lithuania74.2-1.1
13Czech Republic73.7-0.5
14Germany73.5-0.7
15Norway73-1.3
16Austria720.2
17Macedonia71.1-0.2
18Latvia70.4-3.2
19Bulgaria690.7
20Malta68.60.1
21Romania68.6-0.8
22Cyprus68.10.3
23Poland67.8-0.7
24Armenia67.7-1.0
25Belgium67.3-0.2
26Kosovo670.4
27Albania66.52.0
28Spain65.70.6
29Slovenia65.50.7
30Portugal65.31.9
31Hungary 65-1.7
32Slovakia65-0.3
33Turkey64.6-0.8
34Serbia 63.91.4
35France63.8-0.1
36Italy62.2-0.3
37Bosnia and Herzegovina61.90.5
38Croatia61.40.4
39Montenegro60.5-3.8
40Moldova59.10.7
41Russia58.90.7
42Belarus57.9-0.2
43Greece57.70.4
44Ukraine52.30.4
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