Industry, engineering, detail of a burning machine – illustrative photo.
Prague – The Czech Republic is the twelfth most advanced economy in the European Union. Compared to last year, it fell three places, mainly due to high inflation and low added value of production. This follows from the new Economy-focused Prosperity Index, compiled and published today by analysts of Česká spořitelna and the Europe in Data portal. According to the index, Sweden is the strongest European economy.
According to the authors of the index, the development of the Czech economy was hindered by inflation, which was the fifth highest in the EU. According to economist Jana Matesová, three factors caused the rapid growth of inflation. “Firstly, extremely relaxed budgetary discipline was to blame, which in the second half of 2020 and in 2021 was not justifiable due to the pandemic and, with regard to the state of the Czech economy, was not economically justifiable in general. Secondly, poor regulation of the energy market and thirdly, the high concentration and dominant position of some sellers on the Czech market, which enables the abuse of significant market power,” she said.
The authors of the index identify its low added value as a long-term problem of the Czech economy. “Increasing the level of education, science and research on the one hand and strengthening the relationship with the end customer or reducing the share of subcontracting for the production of foreign companies on the other are the way to get out of the trap of the middle income economy and at the same time increase prosperity and living standards,” he said chief economist of Česká spořitelna David Navrátil.
The index rates the Czech Republic well in terms of the volume of investment value, but according to the authors, more focus should be placed on which areas the investments are heading to. “In the Czech Republic, we invest a large part of the GDP, but it is not so visible in terms of quality. Investment in science and research, as well as the degree of robotization of industry, is at the EU average. Housing availability is the worst of all EU countries,” said Navrátil.
The authors of the index also positively evaluate the gradual increase in robotization and the still relatively low public debt, which has, however, been increasing in recent years. They also appreciate the resilience of the economy against shocks, but at the same time point out that this resilience is based on cheap labor and energy intensity.
The prosperity index measures and analyzes the prosperity of the Czech Republic and compares it with other European countries. The index considers prosperity not only as a sum of economic indicators, but also measures it in terms of quality of life and indicators such as social cohesion, population health, quality of education, security, housing affordability or business conditions.