Prague, Czech Republic – When looking East, German investors and businesses have long seen the Czech Republic as the most reliable partner and attractive destination to do business. That may slowly be changing.
According to a survey (in German) released last week by the Czech-German Chamber of Commerce and Industry, the Czech Republic is no longer the most attractive country in Central and Eastern Europe for German investors – a title it held for three years in a row.
In the ranking of 15 Central and Eastern European countries, the Czech Republic is now placed second behind Estonia – crowned as the most attractive economy for German businesses – and followed by Poland, Slovakia and Slovenia. Hungary comes at the 9th position.
According to the survey, German investors still have a good opinion about the Czech economic situation, with respectively 70% and 29% calling it “good” and “satisfying”. But these figures fall short of last year’s results, while most respondents aren’t very optimistic about future economic outlooks: only a small minority (11%) see it as positive, compared to 34% who believe the economic situation will get worse and 55% claiming it won’t change.
According to the Czech-German Chamber of Commerce, the Czech Republic’s persistent shortcomings in a number of areas hamper the country’s attractiveness: these include bad infrastructure, lack of transparency in public procurement, growing labour costs, lack of qualified workforce, bad access to public funding and rise in corruption. An increasing number of German investors also believe the Czech economic policy is less predictable than before.
In the latest annual Economic Freedom Index 2019, the Czech Republic is considered as “mostly free” and has seen its score drop compared to last year.
Among the country’s strongest points, German investors cite the Czech Republic’s EU membership and the quality and reliability of local suppliers.
The survey also hints to Germany’s growing impatience regarding Prague’s decision to stay out of the Eurozone: 61% of respondents are in favour of the Czech Republic adopting the euro, a long-standing and oft-debated issue in Czech politics: its highest rate in the last seven years and up from 52% in 2018.
Germany is by far the Czech Republic’s main trading partner, accounting for nearly one third (29% in 2018) of total Czech foreign trade, and the second biggest foreign investor in the country, behind the Netherlands, according to the Czech central bank.