Successfully investing in the Czech Republic

The Czech economy was able to recover in 2024, finishing the year with a growth rate of 1.1 per cent. For 2025, in the current environment, a growth of at least 1.6 per cent compared to the previous year is expected.

Overall, the current economic situation in the Czech Republic (hereinafter also referred to as “Czechia”) can still be rated as stable and solid, although the local economy continues to struggle with a shortage of skilled labor, geopolitical uncertainties, and still relatively high energy costs. As a result, investments are hesitant.

Additionally, there is still a high dependency on the German market in Czechia. Germany has been and continues to be by far the most important foreign trade partner, followed by the Slovak Republic and Poland. In recent years, Czechia exported about one-third of its goods to Germany.

Therefore, the ongoing weakness in the German economy, resulting in declining demand for goods and services, is also having an impact on Czechia.

The currently stable Czech Koruna has been able to counter this somewhat in recent months. Moreover, the Czech National Bank regularly takes appropriate measures. Recently, it lowered the key interest rate again. As of 9 May 2025, the Koruna is trading at 24.9 to the Euro, and the interest rate has been reduced to 3.5 per cent.

The further development of the economic situation will depend on how global economic and geopolitical conditions, energy policy, the skilled labor shortage, and not least, demand in the main export market Germany evolve.​

  

The location factors in the Czech Republic are currently viewed more positively than in previous years. Investors can still rely on many favorable conditions. These include: 

However, investors are somewhat uneasy about wage pressures and payroll costs. Declining employee qualifications, administrative burdens, and the efficiency of public administration are also seen as problematic.

As a result, there is currently a certain amount of uncertainty, particularly among industrial companies.

The geographical location remains unbeatable with good connections to neighboring countries. The current Minister of Transport has announced plans to accelerate infrastructure expansion. For example, work on the high-speed railway line between Brno and Přerov will begin this year. It is therefore assumed that the construction and logistics sectors in particular are likely to benefit from this.

All these factors and planned initiatives contribute to a generally optimistic mood and increasing revenues. According to the economic survey 2025 conducted by the German-Czech Chamber of Industry and Commerce, a majority (65 per cent) of foreign companies already based in Czechia consider the current situation satisfactory, with 18 per cent even rating it as good. 35 per cent of companies plan to expand their investments this year, especially in the service sector and manufacturing industry. However, declining investments are observed in traditional industrial sectors, such as the automotive industry.

Another positive aspect is the generally stable political situation, despite parliamentary elections scheduled for autumn 2025 and the forecast that the coalition led by Prime Minister Petr Fiala will likely lose its majority.

Therefore, the Czech Republic remains a good address for investments, especially from German-speaking countries. It continues to rank among the top regions in Europe.

For years, the very low unemployment rate and the resulting shortage of skilled labor, along with current global geopolitical tensions and associated trade barriers and conflicts, present significant challenges in Czechia as well.

Last year, for example, the unemployment rate was just 2.8 per cent. As of March 2025, it stood at only 2.5 per cent, still the lowest in the EU. We expect that these conditions will not deteriorate further; on the contrary, they may ease somewhat in the long term.

This easing is supported by the currently low inflation rate, which is now around 2.5 per cent, thanks in part to the Czech National Bank’s recent interest rate cuts. The goal is to stabilize inflation around 2 per cent, so further interest rate cuts in 2025 are not out of the question.

The skilled labor shortage has indeed been the Achilles’ heel of the Czech economy for years. The Czech government is trying to address the issue through various measures, such as creating incentives for workers from third countries in border regions of eastern Czechia. Since 2022, Ukrainian workers have been able to enter into employment in Czechia more easily due to various legal facilitations.

However, many in the business sector feel this problem is still not receiving the necessary attention. The long-debated reform of the vocational education system, which is urgently needed in Czechia, has still not begun, and the situation has actually worsened.

Leaving aside current global geopolitical uncertainties, the country is expected to remain one of the most attractive investment locations in Central and Eastern Europe.

We expect that the new Czech government will also strive to maintain and, if possible, further improve the business climate. The previous government managed public debt and increased government spending relatively well through an implemented austerity package. Corporate taxes, VAT on selected product groups, and income taxes for high earners were all increased.

Due to digitization and the increasing use of AI, a lasting change in the work and business environment overall is also expected. Topics such as continuing education, acceptance and use of AI by employees, data security, and data protection are already gaining importance.​